The Telecommunications Legislation Amendment
(Competition and Consumer Safeguards) Bill 2010 (the Bill)
introduces a package of legislative reforms aimed at enhancing
competitive outcomes in the Australian telecommunications industry
and strengthening consumer safeguards.

The Bill reintroduces measures which were in
the Telecommunications Legislation Amendment (Competition and
Consumer Safeguards) Bill 2009 (the previous Bill). The previous
Bill was introduced in the Parliament on 15 September 2009, but
subsequently lapsed at the end of that Parliament. Some adjustments
have been made to the measures reintroduced in this Bill.

The legislative package has three primary
parts: addressing Telstra’s vertical and horizontal
integration; streamlining the access and anti-competitive conduct
regimes; and strengthening consumer safeguard measures such as the
Universal Service Obligation (USO), the Customer Service Guarantee
(CSG) and priority assistance. The Bill also contains measures to
improve regulatory enforcement.

The Bill contains amendments to the
Telecommunications Act 1997 (Tel Act), Parts XIB and XIC of
the Competition and Consumer Act 2010 (formerly the Trade
Practices Act 1974 ), and the Telecommunications (Consumer
Protection and Service Standards) Act 1999 (the Consumer
Protection Act). The Bill also makes consequential amendments to
the Radiocommunications Act 1992 (the Radcom Act) and the
National Transmission Network Sale Act 1998 (NTN Sale
Act).

Addressing the current structure of the
telecommunications sector

The Australian telecommunications market is
characterised by a very strong and highly integrated incumbent,
Telstra. Telstra owns the only copper network connecting almost
every house, the largest cable and mobile networks, and a 50 per
cent stake in Foxtel, Australia’s largest subscription
television provider.

Partly because of this integration, Telstra
has been able to maintain a dominant position in virtually all
aspects of the market, despite more than 10 years of open
competition. It is the Government’s view that Telstra’s
high level of integration has hindered the development of effective
competition in the sector.

The National Broadband Network (NBN) will
deliver a wholesale-only, open access telecommunications market
structure, transforming the competitive dynamics in the Australian
telecommunications industry.

Consistent with the market structure that will
be delivered through the NBN, Part 1 of Schedule 1 of the Bill
inserts a new Part 33 in the Tel Act which provides a framework for
Telstra to voluntarily structurally separate.

On 20 June 2010 Telstra and NBN Co announced
that they had entered into a Financial Heads of Agreement.
The implementation of that Agreement will provide for the
progressive migration of customer services from Telstra’s
copper and subscription television cable networks to the new
wholesale-only fibre network to be built and operated by NBN Co and
would deliver the envisaged structural reform of the
telecommunications sector.

The Bill creates the framework through which
Telstra can lodge a structural separation undertaking which will be
subject to review by the Australian Competition and Consumer
Commission (ACCC).

It also provides the stronger legislative
certainty that Telstra seeks in the transition of its business
structure by setting out a clear process for Telstra to seek
approval from its shareholders on a proposal for Telstra to migrate
its fixed-line services to the NBN.

If Telstra does not voluntarily implement
structural separation, the Bill requires the functional separation
of Telstra. Functional separation is a regulatory tool that has
been used successfully in other countries such as the UK and New
Zealand and can be used by telecommunications regulators within the
European Union, to address the underlying incentives that
fixed-line incumbents have to favour their own retail
businesses.

The Bill amends the Tel Act to require that if
Telstra does not structurally separate, it must:

·
conduct its network operations and wholesale functions at
arm’s length from the rest of Telstra;

·
provide the same information and access to regulated services on
equivalent price and non-price terms to its retail business and
non-Telstra wholesale customers; and

·
put in place and maintain strong internal governance structures
that provide transparency and reassurance for the regulator and
access seekers that equivalence arrangements are effective.

These provisions are contained in a new Part 9
of Schedule 1 to the Tel Act, to be inserted by Part 1 of Schedule
1 to the Bill.

The Government’s preferred outcome is
for Telstra to voluntarily structurally separate. Accordingly, the
Bill gives priority to a genuine structural separation process over
the functional separation process.

Therefore, the proposed amendments to the
Radcom Act and the new Part 10 of Schedule 1 to the Tel Act will
provide a mechanism for the Minister, by a legislative instrument,
to prevent Telstra from acquiring specified bands of spectrum which
could be used for advanced wireless broadband services. Such an
instrument would not apply if Telstra’s structural separation
arrangements are in place and Telstra has divested its interests in
cable networks and subscription broadcasting licences, or the
Minister has exempted Telstra from the requirement to make such
divestments.

The key changes to the provisions which
address the current structure of the telecommunications sector from
those in the previous Bill are:

·
clarifying the structural separation undertakings process and
allowing Telstra to seek approval from its shareholders for a
settled proposal by:

-
allowing Telstra to nominate one or more specified events to which
the entry into force of a structural separation undertaking will be
subject, such as a resolution of shareholders (proposed section
577AA); and

-
allowing a structural separation undertaking submitted by Telstra
to include a migration plan which will deal with matters concerning
the timing of, and processes involved in, the migration of
Telstra’s customers from its copper network to the NBN and
will be subject to industry consultation (proposed
sections.577B-577BF);

·
the authorisation for the purposes of section 51 of the Competition
and Consumer Act of conduct relating to Telstra’s structural
separation undertaking and migration plan engaged in by Telstra and
NBN Co (proposed section 577BA). This authorisation is proposed in
recognition that Telstra’s progressive migration of customers
from its copper and subscription television cable networks to the
new wholesale-only fibre network, in accordance with an undertaking
accepted by the ACCC, is in the national interest and will promote
structural reform of the telecommunications industry;

·
giving Telstra sufficient regulatory certainty to take a firm
proposal to its shareholders to structurally separate by allowing
Telstra to acquire specified bands of spectrum unless the Minister
determines in a legislative instrument otherwise (proposed sections
577GA-577L and cl.84 and cl.85 of proposed Part 10 of
Schedule 1 to the Tel Act), and to clarify the relationship between
separation undertakings and Competition and Consumer Act provisions
(proposed paragraphs 152AR(4)(e)-(f) et al.);

·
giving priority to a genuine structural separation process over the
functional separation process by allowing Telstra to concentrate on
preparing its structural separation undertaking without having to
prepare simultaneously a functional separation undertaking
(subclauses75(5A)-(5G), and subclauses 76(2) and (4) of
proposed Part 9 of Schedule 1 to the Tel Act);

·
recognising the importance for industry of access to
Telstra’s copper network on an equivalent and transparent
basis during the transition to the NBN by clarifying that the ACCC
cannot accept a structural separation undertaking that does not
contain effective measures relating to the equivalent supply of
regulated services to Telstra’s wholesale customers during
this transition period (proposed subsections
577A(1A)-(1C));

·
improving the enforcement of the undertakings by making
Telstra’s compliance with in-force undertakings a condition
of its carrier licence (proposed subsections 577AD, 577CD and
577ED).

Streamlining
the access and anti-competitive conduct regimes in Parts XIB and
XIC of the Competition and Consumer Act 2010

The Government’s key objective is to
promote an open, competitive telecommunications market to provide
Australian consumers with access to innovative and affordable
services. The telecommunications access regime in Part XIC of
the Competition and Consumer Act 2010 and the
telecommunications-specific anti-competitive conduct regime in Part
XIB are two essential means of accomplishing this objective.

Regulated access ensures that communications
services which have been declared by the ACCC will be provided to
access seekers to enable them to provide services to end-users.
Where the ACCC is of the opinion that anti-competitive conduct is
occurring (or has occurred) it can issue a competition notice,
which can lead to penalties being imposed if the conduct is
proven.

Since the introduction of these measures in
1997, their operation has been criticised by many in industry as
being overly protracted, and vulnerable to ‘gaming’ by
parties with an incentive to delay or damage new entrants. Attempts
have been made to improve aspects of the regime, but with limited
success. Building on extensive consultations with industry,
regulatory agencies and the public, the Bill will significantly
reform the competition regime to address these problems.

Amending Part XIC

Currently Part XIC of the CCA provides that if
parties cannot agree on the terms of access to a declared service,
then either party (the carrier or carriage service provider that
provides access to the service, or the access seeker) can notify an
access dispute to the ACCC. The ACCC must then arbitrate the
dispute. The terms and conditions of access are then those
determined by the ACCC in its arbitration determination for those
two parties only. This is known as the
‘negotiate-arbitrate’ model.

Since it is clear that the
‘negotiate-arbitrate’ model is not producing effective
outcomes for industry or consumers, Part 2 of Schedule 1 to the
Bill reforms the regime to allow the regulator to set up front
prices and non-price terms for declared services. This will create
a benchmark which access seekers can fall back on, while still
allowing parties to negotiate different terms.

The ACCC will issue access determinations for
each declared service, with terms and conditions (and any
appropriate exemptions or special rules) usually set for a period
between three and five years. The regulator will also be able to
determine ‘fixed principles’, such as how depreciation
is treated, to remain in force over a longer period if
necessary.

Concerns were expressed by access seekers to
the Senate Environment, Communications and the Arts Legislation
Committee that, during the transition period in the absence of
regulated terms or a right to notify a dispute to the ACCC under
the previous Bill, parties could be compelled to accept
unfavourable terms in order to guarantee supply of a declared
service. In response to those concerns, the Bill extends the scope
of the transitional provisions to provide that arbitration
determinations prevail over access agreements which are entered
into before the first final access determination is made.

Access agreements entered into between
providers and access seekers will have to be lodged with the ACCC;
however, approval by the regulator will not be required.

The ACCC will have the power to make binding
rules of conduct for the supply of a declared service where it
considers that there is an urgent need to address problems relating
to the supply of the service. The binding rules of conduct are
rules that specify the terms and conditions relating to compliance
with the standard access obligations. Having such rules in place
will allow the regulator to act quickly on issues affecting the
supply of retail services. In a change from the previous Bill, the
ACCC is required to have regard to specified criteria where it is
reasonably practicable to do so.

Binding rules of conduct would operate
temporarily either in advance of, or as a type of variation of, an
access determination. Since they are designed as a temporary
measure to deal with urgent matters, the duration of binding rules
of conduct is limited to a maximum of 12 months. Further, the
Bill now requires the ACCC to commence a public inquiry into making
or varying an access determination within 30 days of making binding
rules of conduct. It is envisaged that binding rules of conduct
will only be used on an occasional basis.

Part XIC of the CCA is modified to remove the
option to apply for exemptions from access obligations or
undertakings, except in relation to new services which are deemed
to require regulatory relief to stimulate innovation in the market.
To promote regulatory certainty and timely decision-making, merits
review of decisions under Part XIC is no longer available. Judicial
review is still available, however, for parties wishing to appeal a
point of law.

The process for dealing with special access
undertakings has proven to be unnecessarily inflexible, with even
minor changes to the terms of the undertaking requiring an entirely
new application to be submitted and assessed from the beginning.
This is changed to allow the ACCC to suggest changes to
undertakings as the assessment process proceeds.

Other key changes that have been made to the
access provisions of the Bill since it was first introduced
include:

Part 3 of Schedule 1 to the Bill makes two
changes to the way the anti-competitive conduct provisions in Part
XIB of the CCA operate. Part 3 streamlines the enforcement process
that the ACCC is required to follow, and clarifies that the
competition notice regime applies to content services delivered by
carriers and carriage service providers.

The competition notice process has been
criticised on the grounds that the consultation process prior to
the issuing of a competition notice can delay enforcement action.
These delays may lead to irreversible damage to the parties that
are affected by any alleged anti-competitive conduct.

The Bill removes the requirement for the ACCC
to undertake consultation before issuing a Part A competition
notice. The Bill also explicitly provides that the ACCC is not
required to observe any requirements of procedural fairness in
relation to the issue of a Part A competition notice.

This amendment will deny the party alleged to
have taken part in anti-competitive conduct the ability to delay
the ACCC’s enforcement activities on procedural grounds. The
focus for both parties will therefore be on resolving the alleged
illegal conduct, rather than on litigation aimed at challenging the
processes followed by the ACCC. The competition notice can be
lifted at any time if the ACCC is satisfied that the allegation of
improper conduct is mistaken, or the situation has been
corrected.

If the ACCC commences court proceedings to
enforce a Part A competition notice, the ACCC would still have to
prove to the court that the competition rule had been breached by
the alleged offender.

Content services are defined in section 15 of
the Tel Act and include a broadcasting service, online information
service, online entertainment service, any other online service, or
any other service as determined by the Minister. Content services
are not currently listed as a service supplied in a
telecommunications market and as a consequence, it is unclear
whether Part XIB of the CCA applies to content services supplied by
carriers and carriage service providers.

Clarifying the scope of Part XIB of the CCA
will increase regulatory certainty and reduce the risk of
protracted legal disputes on this issue.

Strengthening existing consumer protection regulation

The Government
is committed to ensuring consumers are protected in the transition
to the NBN. Current protections are delivered through key
telecommunications-specific consumer safeguards including the
Universal Service Obligation, the Customer Service Guarantee, and
Priority Assistance.

The Bill
strengthens existing legislative requirements to better protect
consumers, address falling service quality and ensure continued
access to basic voice services in the lead up to the NBN. There are
also measures to improve the effectiveness of the regulating body,
the Australian Communications and Media Authority (ACMA), through
enhanced regulatory powers.

The strengthening of the consumer safeguards
contained in the Bill will ensure that consumers are protected and
service standards are maintained at a high level during the
transition to the NBN.

Universal
Service Obligation

The Universal
Service Obligation (USO) has the objective of ensuring basic voice
telephony and payphone services are reasonably accessible to all
people on an equitable basis. However, current requirements imposed
on the primary universal service provider (currently Telstra) are
imprecise and difficult to enforce.

Part 4 of
Schedule 1 to the Bill amends the Consumer Protection Act to
include new requirements for the universal service provider to
supply, on request, standard telephone services with
characteristics and to performance standards determined by the
Minister. It is intended that performance standards will include
maximum periods of time for new connections and fault rectification
and reliability standards. There are also new provisions providing
minimum performance benchmarks that the universal service provider
must meet in fulfilling its responsibilities.

The Bill also
provides the Minister with the power to specify, by written
determination, rules and performance standards to which a primary
universal service provider must adhere in relation to the supply,
installation, maintenance and location of payphones. In addition,
there will be new rules in relation to public consultation and
notification of proposals to remove payphones. The ACMA will have
new powers to direct the universal service provider not to remove
payphones. It is intended that people adversely affected by a
proposed payphone removal will be able to request that the ACMA
consider issuing directions to the universal service provider. In
considering whether to issue such a direction, the ACMA will have
regard to both the consultation and notification requirements as
well as the rules about the location of payphones.

Customer
Service Guarantee

The Customer
Service Guarantee (CSG) requires telephone companies to meet
minimum performance standards or provide customers with financial
compensation when these standards are not met. However, compliance
reporting undertaken by the ACMA over a number of years has
highlighted variations in industry performance in meeting the CSG
requirements. The trends suggest the existing arrangements are not
providing sufficient incentive for the industry to maintain or
improve service quality.

Part 5 of
Schedule 1 to the Bill amends the Consumer Protection Act to
provide for the Minister to establish minimum CSG performance
benchmarks. While failure by a service provider to meet a CSG
standard is not subject to a civil penalty under the Tel Act,
failure to meet the minimum CSG performance benchmarks will be. As
with the USO, expanded powers of the ACMA to issue infringement
notices under the new Part 31B of the Tel Act will assist the ACMA
to effectively enforce this consumer safeguard. It is expected that
this will be a strong incentive on the industry to improve service
quality.

In addition,
the Bill provides for the Minister to establish new CSG timeframes
for connections and repair that will apply to wholesale providers
to assist retail providers of CSG services to meet CSG service
quality standards.

To avoid
stifling innovation and customer choice, the Bill clarifies CSG
waiver provisions provided for under section 122 of the Consumer
Protection Act. A customer’s express agreement for a waiver
will be required. The practice of deeming CSG rights to be waived,
for example, through a standard form of agreement under Part 23 of
the Tel Act, will not be allowed . In addition, there is a
new requirement that a customer waiver of the CSG must include a
statement that summarises the consequences of the customer waiving
the CSG.

To ensure
consumers have the safety net of always being able to purchase a
CSG service, the Bill makes explicit that the CSG cannot be waived
for a telephone service that is supplied in fulfilment of the
USO.

Priority
Assistance

Priority
assistance services provide enhanced telephone connections and
fault repairs for customers with a need for such services because a
person at the residence has a life threatening medical condition
and is at risk of suffering a rapid, life threatening deterioration
in their condition.

To assist
customers purchase services with priority assistance if this is
needed, Part 6 of the Bill introduces a new service provider rule
in Schedule 2 to the Tel Act requiring service providers to either
offer a priority assistance service in accordance with the
Communications Alliance code on priority assistance or inform
customers of providers from whom they can purchase such a service
if they require it. Telstra will remain bound by its current
carrier licence condition requiring it to have priority assistance
services.

The main change
from the consumer protection measures in the Bill previously
introduced in the Parliament is amending the new CSG performance
benchmark provisions to exclude contraventions of standards from
being counted against benchmark compliance when the contravention
results from another service provider’s actions—it
would be unfair to impose a penalty on a service provider in this
circumstance (proposed sections 117C and 117F).

Enforcement

Part 7 of
Schedule 1 to the Bill inserts a new Part 31B into the Tel Act
which provides expanded powers for the ACMA to issue infringement
notices. This will assist the ACMA in enforcing obligations under
the telecommunications regulatory regime.

Part 8 of
Schedule 1 to the Bill substitutes a new definition of civil
penalty provision to simplify and clarify the definition.

The key
changes to the enforcement measures from those in the Bill
previously introduced in the Parliament are:

·
inserting a new Part 5A in Schedule 1 to the Bill which broadens
the ACMA’s record keeping powers to allow it to obtain
regular reports about carriers’ and service providers’
compliance with their obligations;

·
requiring the ACMA to engage in public consultation when making or
varying the list of provisions subject to infringement notices (new
subsection 572E(8) in proposed Part 31B of the Tel Act);
and

·
inserting a new Part 9 in Schedule 1 to the Bill which will makes
changes to the Tel Act to enable the Minister to direct the ACMA to
determine an industry standard to enable a more effective
regulatory response where industry codes do not adequately deal
with consumer issues.

FINANCIAL IMPACT STATEMENT

These reforms
will have a moderate financial impact on administration costs for
the ACCC and the ACMA, which will be funded by increasing the
carrier licence charges levied by the ACMA under the
Telecommunications (Carrier Licence Charges) Act
1997 . This will mean that the proposal has a limited
fiscal impact for the Commonwealth.

REGULATION
ASSESSMENT

ADDRESSING
TELSTRA’S VERTICAL AND HORIZONTAL INTEGRATION

1. Introduction

This regulation
assessment has been prepared in consultation with the Office of
Best Practice Regulation to provide an analysis of the regulatory
impact of the Government’s decision to implement measures to
address Telstra’s horizontal and vertical integration.

2. Background

On 7 April 2009, the
Australian Government announced it would establish a new company
that would invest up to $43 billion over eight years to build and
operate a National Broadband Network (NBN) delivering superfast
broadband to Australian homes and workplaces.

This historic nation-building investment will
help transform the Australian economy and create jobs and
businesses for the 21st century.

The Government’s plan will dramatically
improve the availability of superfast broadband across Australia
and fundamentally change the competitive dynamics of the Australian
telecommunications sector. This new network will be wholesale-only
and open access to maximise competition, and ensure improved
consumer outcomes.

Operating as a wholesale-only provider, the
NBN Company (NBN Co) will solve the current structural issues in
the telecommunications sector where the vertically integrated
incumbent owns the only ubiquitous fixed-line network in Australia,
and competes against its wholesale customers in downstream retail
markets. NBN Co will have less incentive to unfairly discriminate
between access seekers. It will also be required to operate on an
open access basis and provide equivalent terms and conditions of
access to all access seekers.

The Government has stated that the NBN will be
rolled out progressively over eight years. During this time the
existing telecommunications regulatory regime will remain important
for delivering services in the interests of Australian consumers
and businesses.

As such, reform of the current
telecommunications regulatory regime is a core element of the
Government’s historic plans for the NBN. Taking into account
the views expressed in response to the NBN discussion paper
released on 7 April 2009, the Government announced on 15 September
a reform package that included measures to promote greater
equivalence, transparency and competition in the industry.

Since the Bill
was introduced in its original form last year (the previous
Bill), it has been the subject of a Senate Committee inquiry
which involved detailed submissions from stakeholders. In addition,
the financial heads of agreement reached between Telstra and NBN Co
in June 2010 has clarified the form of structural separation being
progressed by Telstra, allowing the proposed legislation to be
revised to give better support for those proposals.

The Bill reintroduces measures in the previous
Bill that lapsed at the end of that Parliament.

The Bill contains some changes from the
previous Bill, but the policy objective of the previous Bill has
not altered. The most significant change is that the Bill now
provides more legislative certainty for Telstra in the transition
to changing its business structure.

3. Issues associated with vertical and horizontal integration would
be addressed by

structural
separation

Telstra is a
vertically integrated incumbent, which provides access to its
network and supplies wholesale services to those that it competes
with in downstream retail markets. Telstra also owns the largest
mobile network, the largest hybrid fibre coaxial cable network in
Australia (passing 2.5 million homes) and
50 per cent of Australia’s largest subscription
television provider, Foxtel.

Telstra’s integrated position across all
the telecommunications platforms has led to long-standing and
widespread concerns that the existing telecommunications structure
is failing consumers, businesses and the economy in general.

As the nation
moves to superfast broadband it is the Government’s clear
desire for Telstra to vertically structurally separate, on a
voluntary basis, in the transition to the NBN to be consistent with
the structure of NBN Co. This is a view shared by consumer group
the Australian Telecommunications User Group which stated:

‘ [t] he Government’s approach to the NBN
operator should be the benchmark for arrangements during the 8 year
transition period… ’—Australian
Telecommunications User Group [1]

The Government welcomed the announcement by
Telstra and NBN Co that they had entered into a Financial Heads of
Agreement on 20 June 2010. The agreement will deliver structural
separation by providing for the progressive migration of customer
services from Telstra’s copper and pay-TV cable networks to
the new wholesale-only network to be built and operated by NBN
Co.

Such an approach
will ultimately lead to a national outcome where there is a
wholesale-only network not controlled by any retail
company—in other words, full structural separation in time
and is consistent with the wholesale-only, open access market
structure to be delivered through the NBN.

· a materially
higher return is available on retail supply than from providing
network access services; and

· effective
competition in downstream markets would result in the erosion of
excess profits if access seekers had equivalent access to the
upstream input; and

· countervailing
incentives—such as those that might exist under the threat of
effective competition across all levels of production (e.g. if
HFC [hybrid fibre
coaxial] and/or wireless networks provided strong competitive
constraint)—are weak. ’—ACCC [3]

Further, the ACCC
explains that a structurally separated entity has few incentives to
discriminate against downstream rivals because:

‘… without a retail arm to
which it may seek to provide an advantage, a wholesale-only
operator would gain little from favouring one access seeker over
another, thereby ensuring true equivalence. On the other hand,
vertical integration of any form into downstream markets, even when
subject to regulatory measures, will not ensure
equivalence. ’—ACCC [4]

The views of
the industry

Submissions in response to the Regulatory Reform discussion paper
called for Telstra’s structural separation and stated
that:

‘…Optus does not believe
that these [functional
separation] arrangements go far enough and they remain a second
best approach to structural
separation.’ —Optus [5]

According to these
submitters, structural separation is the only remedy to fully
address Telstra’s incentives to discriminate.

The views of
the regulator

The ACCC
considers:

‘… that
structural separation is the only regulatory arrangement that will
in practical terms address Telstra’s incentives and ability
to discriminate against its competitors and thereby ensure
equivalence. ’—ACCC [9]

Potential
benefits to the company of structural separation

The ACCC in its regulatory submission [10]
stated that vertical separation can enhance the value of separated
firms and that there may be some vertical dis-economies of scope
which may arise as firms take on additional functions which are
outside the scope of its core functions and which the firm is not
well equipped to perform.

Voluntary structural separation is not without precedent. The ACCC
in its submission provided several examples of companies which have
chosen to legally and structurally separate including:

·
in May 2008, Time Warner Inc announced that it would structurally
separate from the second largest cable operator in the United
States, Time Warner Cable Inc. The reason for the separation was
that each company would have greater strategic, financial and
operation flexibility and would be better positioned to compete
within their respective markets;

· in 2005, the
Australian Gas Light Company split its infrastructure assets from
its retail and merchant energy business on the basis that the move
would create greater long-term value for shareholders; and

· in 2007, Toll
split off its infrastructure assets (ports and the Pacific National
rail business) from its
logistics business. Regarding the re-structure Toll stated that
‘ dynamic growth opportunities were identified in both
businesses, building on Toll’s current
strong results and performance ’.

How structural
separation could be implemented

Telstra’s
structural separation could be implemented under a voluntarily
enforceable undertaking to be submitted to the ACCC. Under
this sort of mechanism, the Minister could provide guidance to the
ACCC on the matters it would take into account when considering
whether to accept the undertaking.

It is important to note that the enforceable
undertaking to structurally separate could take different forms.
For example, to achieve the aim of structural separation:

·
Telstra could undertake to create a new company, vest its
fixed-line network in that company and then sell that company,
leaving Telstra operating as a retailer of fixed-line services;
or

·
Telstra could undertake to migrate its traffic to the NBN over time
and sell or cease to use its fixed-line assets. Under this
option, Telstra would undertake to:

o supply
services to its retail customers using carriage services provided
by means of the NBN;

o vend the
fixed-line assets that the NBN requires to NBN Co; and

vend to another
company (or in the alternative, cease to use) any other fixed-line
assets.

Under the terms of the non-binding Financial
Heads of Agreement between Telstra and NBN Co, Telstra will
progressively move customer services from its copper and HFC
networks to the NBN as it is rolled out. The agreement also
provides for the reuse of suitable Telstra infrastructure,
including pits, ducts and backhaul fibre by NBN Co as it rolls out
its new network, thus avoiding infrastructure duplication.

In the absence of an outcome which delivered
structural separation on a voluntary basis, regulatory intervention
will be required to address Telstra’s vertical and horizontal
integration.

4. Telstra’s vertical integration

The problem being
addressed

Telstra’s level
of vertical integration raises concerns about the extent to which
it has the ability and the incentive to favour its own retail
business over its wholesale customers when providing access to
various services, particularly those which are key upstream inputs
for providing downstream services to end-users. It also can
strategically delay or limit investment in access services and
related infrastructure.

These incentives may lead to behaviour by the
vertically integrated incumbent that limits the development of
effective competition in the provision or availability of services,
including new and improved services. Types of discriminatory
behaviour that a vertically integrated incumbent might engage in
include: [11]

·
price discrimination—where the access provider charges a
higher price to its wholesale customers than is implicitly charged
to its own retail business;

·
discriminatory use or withholding of information—where the
access provider provides information to its retail business with
information it does not provide to access seekers or refuses to
supply other information which is necessary to take up the
wholesale offer or to supply the retail service;

·
delaying tactics—where the access provider supplies a certain
input to a downstream competitor at a later point in time compared
to its own retail business;

·
quality discrimination—where the access provider supplies
products and services at a lesser quality to downstream competitors
than it supplies to its own retail business;

·
strategic design of product characteristics—for example, the
access provider may use particular standards that are easy to meet
for its own retail business but not for its wholesale customers;
and

·
undue use of information—this may arise where an access
provider obtains certain information about the customers of its
downstream competitors. Based on this information, the access
provider can target competitors’ customers with tailor-made
offers and so can restrict its competitors’ sales and/or
raise its rivals’ costs.

Lord David Currie,
the former Chairman of Ofcom, the United Kingdom’s (UK)
communications regulator, stated the following about the harmful
effects of discriminatory behaviour:

‘It does
not even require active non-price discrimination. All that is
needed is for the incumbent not to try their hardest to achieve
reliability, timeliness and predictability to disrupt significantly
the launch by competitors of a rival retail proposition. A
significant mismatch between the promise of a marketing campaign
and consumers’ actual experience of waiting weeks or even
months to get what is promised can do significant and lasting
damage to a competitor’s market entry. ’—Lord
David Currie [12]

Industry stakeholder concerns

Telstra has been
criticised in the past for using its vertical integration to
protect its position across key telecommunications markets and
therefore limiting the ability for competition to grow in the
sector.

Optus in its
submission to the Government’s regulatory reform discussion
paper gave the following examples of Telstra’s behaviour in
using its vertical integration to limit competition in
broadband.

· ‘Initially set high prices for
broadband access thereby discouraging take-up. Telstra only dropped
its retail prices for broadband services when Optus commenced
re-selling its wholesale DSL [digital subscriber line] service in February
2004;

· Delay competitor deployment of DSL
services by structuring its wholesale offering in such a manner
that its competitors could not offer services substantially
different from those offered by Telstra. For example, Telstra
refused to configure its wholesale ADSL [asymmetric digital subscriber line] service so as
to allow for a high speed Internet service to be provided to a
residential customer at a different quality of service from that
which Telstra BigPond offers;

· Squeeze the margin available to
competitors taking its wholesale DSL service by setting retail
prices close to or below wholesale prices;

· Limit the functionality of its
wholesale broadband services and thereby hinder innovation by
competitors, such as symmetrical services and VOIP [Voice over Internet Protocol]
services; and

· Artificially cap broadband speeds at
1.5Mbps [Megabits per second]
on first generation ADSL(a technology capable of up to 8 Mbps)
and delaying until February 2008 the introduction of ADSL2+
services (except in exchanges where it faced direct competition
from ADSL2+ services provided by competitors using ULLS
[unbundled local loop service] access to deploy their own
equipment). Many areas within Australia continue to be denied
access to ADSL2+ services.’ —Optus [13]

Optus also noted
that Telstra misused information available to it as a wholesale
provider:

‘Telstra has been found guilty
of misusing information available to it as a wholesale provider, by
passing this information to its retail arm for marketing and
competitive analysis purposes. The court found that, at least in
the period 1993 to 2000, Optus’ confidential long distance
traffic information was provided by Telstra Wholesale to Telstra
Retail and then used to prepare ‘Market Share’
reports…’ —Optus [20]

Measures to reduce the ability and
incentives to discriminate

The basic concept of
vertical separation in telecommunications is to separate the
bottleneck upstream assets, such as the copper customer access
network, so that control of access to them cannot be used to
lessen, damage or exclude competition in downstream markets.
Vertical separation can be an effective regulatory tool to improve
competition and services to end users by promoting transparency and
equivalence.

Transparency and equivalence

Transparency can be
achieved by implementing processes and reporting requirements so
that the regulator and Telstra’s wholesale customers can be
confident that Telstra’s wholesale customers are being
treated in an equivalent manner to how Telstra supplies its own
retail business.

Equivalence is where Telstra provides
essential business inputs on equivalent terms and conditions to
both its own retail business and its wholesale customers.
Equivalence relates to both price and non-price terms and
conditions such as service provisioning and availability of
information about the network, and is considered an essential
factor in promoting effective competition in downstream retail
markets.

The history of
attempting to address Telstra’s level of vertical
integration

In an attempt to
address Telstra’s level of vertical integration by promoting
equivalence and transparency the following regimes have been
implemented in Australia.

Accounting separation

Measures to promote transparency were first
introduced in 1991 requiring the Australian Telecommunications
Authority to develop an accounting separation regime, which was
referred to as the chart of accounts and a cost allocation manual.
The regime, however, only required horizontal accounting separation
between each carrier’s retail services. Horizontal accounting
separation is a requirement for reporting revenue and historical
cost information of the carrier’s different retail businesses
to the ACCC.

In 2001, under direction from the Minister for
Communications, Information Technology and the Arts, the ACCC
introduced its Telecommunications Industry Regulatory Accounting
Framework issued under section 151BU of the Trade Practices Act
1974 . These record keeping rules required Telstra to keep
vertically separated accounts on an historical cost basis and
report revenues and costs for Telstra’s retail and wholesale
services separately—including wholesale services Telstra
provides to itself internally.

In June 2003, a second set of accounting
separation rules were implemented by the ACCC which required
vertical accounting separation under a current cost accounting
basis. Current cost reporting requires Telstra to produce
accounting records that reflect current costs (i.e. the costs
Telstra would incur if its network was built today).

Furthermore, the then Government directed the
ACCC to implement an enhanced form of accounting separation of
Telstra. This required the ACCC to report on key performance
indicators for non-price terms and conditions that compare service
performance between Telstra’s retail and wholesale supplied
services. The purpose of the enhanced accounting separation
framework for Telstra, which is still in force at present, was to
provide the ACCC, access seekers and the public with greater
transparency with respect to Telstra’s wholesale and retail
costs. It also required imputation
testing, which can be used to assist in detecting an
anti-competitive price squeeze in a retail market.
Specifically, the
imputation testing implemented under this direction involved
comparisons of:

· the
retail price charged by Telstra for a particular service;
and

· the
(wholesale) access price charged by Telstra for an essential input
to that service plus the additional costs incurred in transforming
the essential input to the retail service (the ‘retail
costs’).

Operational separation

In 2005, the current
operational separation framework for Telstra was introduced
following a review of the competition regime. The operational
separation regime aimed to promote the principles of transparency
and equivalence in relation to the supply by Telstra of wholesale
services.

The operational separation of Telstra is a
statutory condition of Telstra’s carrier licence. Telstra was
required to prepare an operational separation plan, which was
approved by the then Minister on 23 June 2006. Under the plan,
Telstra is required to maintain three business units, wholesale,
retail and key network services and to operate these businesses
substantially separate from each other.

The operational separation plan includes four
strategies for Telstra to provide equivalence:

·
a service quality strategy—which aims to ensure that
Telstra’s standard of delivery of eligible services made
available to its wholesale customers is equivalent to the standard
of delivery of comparable eligible services supplied to its own
retail business unit;

·
an information equivalence strategy—which aims to ensure that
information provided by Telstra’s key network services or
wholesale business units to its wholesale customers about relevant
changes to Telstra’s network is, to the extent possible,
equivalent to the provision of the same or similar information to
its own retail business unit;

·
a customer responsiveness strategy—which aims to ensure that
Telstra is responsive to complaints made by its wholesale customers
and also includes the measures Telstra will implement to monitor
its compliance with the service quality and information equivalence
strategies.

Telstra’s operational separation plan
also provides for a price equivalence framework, which seeks to
provide an ongoing assurance that Telstra is not favouring its
retail business by supplying services to itself at lower prices to
the services that it supplies to its wholesale customers. The price
equivalence framework requires Telstra to conduct imputation
testing to assess the impact of material price changes, on the
margin available to efficient competitors.

The accounting, record keeping and operational
separation regulations are all still in effect.

The effectiveness of the current
operational and accounting separation regulations

The broad consensus across industry and from the regulator is that
accounting and operational separation regimes have not promoted
genuine equivalence of access or effective competition in the
telecommunications sector.

The views of
the regulator

The ACCC’s experience is that:

‘… the
current operational separation regime aimed at promoting
equivalence is ineffective and does not address Telstra’s
incentive and ability to discriminate against its
competitors ’, and ‘[s] ince coming into
effect in June 2006 the operational separation arrangements that
apply to Telstra have been shown to be ineffective in a number of
essential areas. Since
June 2006 Telstra has been able to :

· supply ADSL2+ services on a retail basis only;

· ignore the ACCC’s written advice on imputation testing
principles;

· deflect wholesale customer complaints on the basis they were not
made under the OSP [operational separation plan] ;

· provide whole-of-business incentives to executives in the
ring-fenced divisions; and

· require end-user customers who are customers of access seekers
to provide Telstra retail units with information that is
confidential to the access seeker ’.—ACCC [21]

All the above
issues mentioned by the ACCC have not promoted genuine equivalence
or transparency, or promoted effective competition. Expanding
further the supply of ADSL2+ services on a retail only basis, until
relatively recently, has had the effect of limiting the opportunity
for Telstra’s competitors to compete with Telstra for the
most valuable business customers.

The views of the
industry

The overwhelming message from regulatory consultations conducted in
2008 and more recently in response to the National Broadband
Network: Regulatory Reform for 21st Century Broadband Discussion
Paper is that the current operation and accounting separation
measures have not worked effectively. Most of the 140 submitters
called for structural or stronger functional separation of
Telstra.

The following
comments in the regulatory submission summarise the general
sentiments raised in response to the discussion paper.

‘ there has been no discernable increase in
competition in the fixed network market after the introduction of
accounting and operational separation…Operational Separation
in Australia has not been a transparent regulatory
tool. ’ — Australian
Telecommunications User Group [22]

‘it is clear that they [the operational separation
arrangements] have delivered little if any benefits to
end-users…these arrangements are not fit for
purpose...’ —Optus [23]

‘ The cost of trying to manage behaviour [sic] while
making inadequate efforts to change incentives has been
demonstrated by the continual gaming of the regulatory requirements
in Australia in the past 12 years and by the abject failure of the
operational separation and, before them, the accounting separation
arrangements. ’ — Competitive Carriers Coalition [24]

‘… there are no benefits of the operational and
accounting separation regimes ... ’ —Macquarie
Telecom [25]

‘ Accounting separation and operational separation have
been tried but have both been spectacularly
unsuccessful .’—AAPT [26]

‘Operational separation of Telstra has not led to
satisfactory outcomes in the Australian telecommunications
sector .’—Vodafone [27]

‘… the current so-called "operational separation"
regime that applies to Telstra, TransACT strongly believes that
that regime has failed …’—TransACT [28]

The sentiments
expressed by both the regulator and Telstra’s competitors
demonstrates a lack of trust in the operational separation regime
and its lack of transparency has not assured them that access
seekers are being treated in an equivalent manner to
Telstra’s own retail business.

One of the major issues
expressed by access seekers is the delays in being provided a
wholesale service by Telstra and issues surrounding access to
Telstra’s exchanges to install equipment. For example:

‘ Some of the
conduct engaged in by Telstra has been quite explicit, for example
defying access obligations and ... refusing industry participants
access to exchanges. Some of the conduct has been more strategic,
such as refusing to implement efficient migration processes, and
the practice of disputing the ACCC pricing decisions to delay
competitor rollout, impose litigation costs on the industry and
unsettle investment plans. One thing is very clear, during the
history of competition in our industry Telstra has had no appetite
to foster or promote competition, innovation or increased network
utilisation. ’—Primus [30]

‘ Optus complained to the ACCC
that Telstra was providing higher performance standards to its
retail customers than wholesale customers—for example, by
routinely offering better connection times to its retail customers
than to wholesale customers…Whilst Telstra Retail is able to
provide connection remotely at the flick of a switch—Telstra
applied a cumbersome process for wholesale customers requiring two
separate technicians to visit the customer’s premises and
taking several days to complete (and requiring customers to be
present for both visits). ’—Optus consultant Dr
Chris Doyle, University of Warwick [31]

Further, access seekers
need to have confidence that the regime to address the issues
surrounding vertical integration is working effectively to justify
their investments. In its submission the Strategy and Policy
Consultants Network, who specialise in providing strategy, policy
and economics advice in electronic communications markets, stated
that:

‘ [w] hile the incentives for discrimination remain
in place [due to vertical integration] it is essential that
wholesale customers of Telstra believe that they are being treated
equally, as perceptions are sufficient to change the behaviour of
operators. They need to have the confidence that the system is
working to justify investments in the market, without which retail
customers will be the losers.’ —Strategy and Policy
Consultants Network [32]

Most
fundamentally, the current operational separation regime has not
addressed Telstra’s vertical integration and its lack of
incentive to reach agreement on reasonable access terms, or to
conclude negotiations speedily with access seekers.

The chairman of
the ACCC, Mr Graeme Samuel, has previously reported that:

‘ [s] ince 1997, the ACCC has been notified of a
total of 157 telecommunications access disputes. This is in stark
contrast to the three access disputes that have been notified to
the ACCC across all other sectors of the economy.

Over the past 24 months, judicial
review has also been sought in respect of almost all final
arbitration determinations made by the ACCC. As of 6 May, there
were 15 final determinations before the Federal Court—all
relating to the unconditioned local loop service and the line
sharing service.’ —Mr Graeme Samuel, ACCC [33]

As of mid-October
2010, the ACCC has been notified of 164 telecommunications access
disputes since 1997, which is in contrast to four access disputes
in other sectors. [34]

This large number of
access disputes compared to other regulated sectors demonstrates
both the ability and the incentive Telstra has to pursue a
litigation strategy to limit or delay competition. Such a strategy
can have harmful effects on investment in the sector. The Strategy
and Policy Consultants Network comments:

‘ [u] ncertainty about outcomes will have an impact
on operators’ ability to commit to product and market
developments. This will particularly be the case where the process
is not able to deliver outcomes in a timely manner, as delays in
the process will typically disadvantage operators competing with
Telstra. ’—Strategy and Policy Consultants
Network [35]

Primus also notes
that:

‘…Telstra typically rejects the authority of the
ACCC and routinely challenges decisions in court, means the
industry never acquires any certainty about the terms and
conditions applicable to an access service it acquires, until it is
of historical impact only .’—Primus [36]

In addition to the
business uncertainty caused by the high level of disputation, Optus
estimates it could have cost the whole industry at least $200
million over the past 12 years in the preparation of expert
statements and legal support not to mention the time and resources
required to participate in these processes. [37]

To address the
equivalence concerns expressed by the industry and the regulator,
Telstra proposed in its regulatory reform submission the
establishment of an independent technical Telecommunications
Adjudicator. The Telecommunications Adjudicator would make binding
decisions specifically on equivalence and related service and
technical issues in the supply of regulated services to access
seekers.

The
Telecommunications Adjudicator would be a welcome addition to the
Australian telecommunications landscape to resolve many of the
non-price issues in the sector. However, it still does not
effectively alter Telstra’s underlying incentive, as a
vertically integrated incumbent, to favour its own retail business
over its competitors.

Operational
separation’s weak enforcement mechanisms

Enforcement mechanisms for the existing operational separation
regime are weak and indirect. There is no legal obligation on
Telstra to comply with its operational separation plan. In the
event of a contravention, the Minister may direct Telstra to give
him a draft rectification plan for approval. Once the Minister
approves the rectification plan, it is then a licence condition
that Telstra comply. Weak enforcement mechanisms are a disincentive
to enforcement action and no directions have been issued. The ACCC
states that:

‘[w] e
[the ACCC] continue to receive complaints of conduct that
suggest that the objective of equivalence, which was the objective
of the [operational separation] regime, is not being
achieved. There have been some instances of conduct [by
Telstra] since the regime’s inception which, while it is
not clear they breach the operational separation plan, do not
promote the objective of equivalence which was the fundamental
objective of the plan in the first
place. ’—ACCC [39]

The ACCC has written
twice to the relevant Ministers advising of its concerns on the
apparent shortcomings of the operational separation plan:

Second, on 27 February 2008, in relation to Telstra’s
failure to provide information to the ACCC in response to a formal
request made under clause 6.8 of Telstra’s
OSP [operational separation plan] . The request required
Telstra to produce the model it uses to assess its pricing under
the PEF after notifying the ACCC of a material price
change.’ —ACCC [40]

It is clear that
stronger enforcement mechanisms are needed to give the regulator
sufficient powers to ensure that the objectives of transparency and
equivalence are being met.

Why Government
action is needed

During the rollout of the NBN, the existing regime, including
measures to promote transparency, equivalence and competition, will
remain important for delivering outcomes in the interests of
consumers and businesses. The intended outcome is a healthy
competitive market, thereby improving quality, prices and choices
for end-users, and creating a sector where different business
models and innovation can prosper.

Current state
of competition in Australian telecommunications market

The ACCC has reported that competition in the Australian
telecommunications market is not emerging as anticipated.

‘effectively competitive telecommunications
markets—anticipated in 1997 when the sector was opened to
competition—do not appear to be emerging…

In particular, the industry’s underlying structural
features have hindered the development of competition with the
high, specialised and largely “sunk” costs of
investment in the most fundamental elements of telecommunications
networks (e.g. the ducts, pits, poles, copper, cable and fibre)
imposing high barriers to entry for competitors, and thus
conferring a very high degree of market power on the incumbent
operator, Telstra.

While new entrants and investment have made some inroads, the
incumbent still retains enduring and substantial market power, with
shares of 72 per cent, 58 per cent and 42 per cent of retail
PSTN [public switched telephone network] voice services,
retail fixed broadband and retail mobile voice services in
2007-08…

A key factor in Telstra’s ongoing success in maintaining
its dominant market position has been its historical position as
the owner of the ubiquitous CAN [Customer Access Network] .
The ability of competitors to access the existing fixed-line CAN
continues to directly affect how access seekers compete for end
users. It is becoming increasingly evident that the CAN is (and
will remain) an enduring bottleneck, emphasising how critical it is
for access seekers to be able to obtain access to the CAN at
reasonable prices. ’—ACCC [41]

The following graph using the
Herfindahl-Hirschman Index (HHI) further illustrates
Telstra’s dominance of the retail fixed voice and broadband
sectors in Australia. The subscriber-based HHI measures
concentration levels in a service area and provides a snapshot of
competition in that particular service area. The HHI can range from
0 to 10 000 with increases in the index generally indicating a
decrease in competition and an increase of market power. While
market share measures are only one measure used in competition
analysis, the ACCC’s 2008 Merger Guidelines indicate that
scores above 2,000 identify potential competition issues, which can
be indicative of structural characteristics of the market that
exist or are emerging. [42]

For retail public switched telephone network
services, the very high concentration levels are likely to be
influenced heavily by Telstra’s level of vertical integration
in the market with shares of close to or over 70 per cent in the
last three years as illustrated by the table below. [43]

In the case of retail broadband services,
there has been an upward trend in the concentration of the market
since 2005-08 as illustrated in the table below. The ACCC reports
that during this period, Telstra grew its market share of retail
services by almost 25 per cent, while its major competitors’
iiNet managed to retain its existing market share and Optus’
fell by a fifth. In addition, the share of the market held by small
internet service providers halved during the same period. [44]

·
24th and 22nd for residential and business telephone connection
charges respectively;

·
10th for fixed broadband tariffs;

·
73rd and 97th for residential and business monthly telephone
subscription charges respectively; and

·
29th for accessibility of digital content.

The ACCC’s
analysis and Australia’s poor international indicators
highlight the ongoing importance of Telstra’s competitors
being able to access Telstra’s customer access network in a
manner that is transparent and equivalent to how Telstra’s
retail businesses access the network. To create an environment for
healthy competition to flourish, stronger vertical separation with
enhanced equivalence and transparency measures is required.

In countries such
as the UK where stronger forms of separation have been in force
since 2005, there has been a marked improvement in its key
international telecommunication statistics and indicators. The UK
outperforms Australia across a range of key telecommunications
indicators as shown in the table below.

As illustrated by
the difference between the international rankings between Australia
and the UK, it is anticipated stronger separation measures would
improve competition, lower prices and improve take-up rates in the
broadband market.

5. Objectives of the Government’s vertical separation
action

The
Government’s objective is to address concerns created by
Telstra’s vertical integration by reducing Telstra’s ability and
incentive to discriminate against other service providers and to
promote greater equivalence and transparency which will encourage
greater competition across the telecommunications industry.

If Telstra decides not to proceed with voluntary
structural separation then a functional separation regime will be
established to address Telstra’s vertical
integration.

It has
been widely observed that imposing mandatory structural separation
on Telstra is likely to raise compensation issues.

The ACCC notes that although functional separation
is unable to ensure equivalence:

‘… a
strong functional separation model is a step forward in promoting
equivalence from the current operational separation regime applied
to Telstra… [it] may go some way to providing open
access and promoting equivalence of price and non-price terms and
conditions. ’—ACCC [53]

Optus in its submission argues that functional
separation is the second best option to structural separation,
however, the:

‘ [f] unctional separation of the form implemented in
the UK and New Zealand provides an appropriate starting point for
consideration of a new regulatory settlement. Such an approach
would almost certainly represent a significant improvement on the
arrangements we have today. ’—Optus [54]

The
proposed functional separation framework will be implemented
through legislative amendment to the Telecommunications Act
1997 with more detailed requirements to be addressed by Telstra
to be set out in a determination to be made by the
Minister.

Broadly,
Telstra will be required to submit undertakings to the Minister
concerning the implementation of functional separation, and ongoing
commitments to functional separation.

These
undertakings will be contained in a draft Functional Separation
Undertaking (FSU). Those undertakings must be directed at achieving
key principles and objectives of functional separation and must
include specific matters set out by the Minister in a requirements
determination. The key principles of the new functional separation
regime include:

· Telstra to operate its network
and wholesale functions at arm’s-length from the rest of
Telstra;

· non-Telstra wholesale customers
to access regulated services on equivalent price and non-price
terms and conditions as is provided to Telstra’s retail
unit;

· Telstra’s retail unit to
only be consulted on future products and future demand requirements
at the same time and in the same way a non-Telstra access seeker is
consulted; and

· strong internal governance
structures with transparency so that Telstra’s competitors
and the regulator can be confident that Telstra’s retail unit
is being treated the same as competitors.

The
Minister will consider the draft FSU submitted by Telstra, hold a
public review and consult the ACCC.

The
Minister will then approve, vary or replace the draft FSU. It then
becomes a final FSU. Telstra will then be required to comply with
the final FSU with compliance being a carrier licence
condition.

As part of
the requirement for strong internal governance structures with
transparency, Telstra will be required to establish an oversight
and equivalence board to monitor and support Telstra’s
compliance with the final FSU and report to Telstra’s Board
and the ACCC about that compliance. There will also be provisions
for the establishment of a new independent telecommunications
adjudicator, to provide a practical way to enable access providers
and access seekers to resolve non-price equivalence and service
level issues.

More detailed requirements of the functional
separation undertaking to be addressed by Telstra will be set out
in a written determination (a functional separation requirements
determination), which is not a legislative instrument, to be made
by the Minister within
90 days of the commencement of the legislation and will provide
specific detail on:

·
the responsibilities of, and requirements on, the functionally
separated business unit;

·
the assets residing in the functionally separated business
unit;

·
the equivalence requirements for regulated services to be provided
by Telstra;

·
the functional separation governance framework;

·
enforcement and oversight provisions; and

·
the requirement for Telstra to establish an oversight and
equivalence board, including a support office, to monitor and
support Telstra in complying with its FSU.

As functional separation is the next best
option to structural separation, the functional separation
obligations on Telstra would cease in the event that Telstra
submits an enforceable undertaking acceptable to the ACCC to
structurally separate. The Bill also gives priority to a genuine
structural separation process over the functional separation
process by extending the period that the Minister must make the
functional separation requirements determination if it is clear
that Telstra is planning to structurally separate.

7. Regulatory assessment of functional separation

Functional separation
provides a much stronger form of separation than the current
operational separation regime and is similar to regimes introduced
in the UK and more recently in New Zealand (see Appendix A for a
table providing a comparison of the Australian, UK and New Zealand
separation models - source ACCC ). It would enable Telstra to
retain limited economies of scale and scope as a vertically
integrated supplier where services are not regulated, such as in
the mobile sector, but would have much more stringent controls over
its network and wholesale dealings with its own retail arm in
relation to regulated services.

Price and non-price equivalence, ring-fencing
measures and enforcement provisions will all be much stronger than
the current regime, thereby providing the right incentives for
Telstra to deliver its network and wholesale functions to a high
standard no matter which customers it is dealing with.

The exact requirements for these measures and
provisions will be set out in the functional separation
requirements determination with the following descriptions being
examples of how the measures in the proposed functional separation
framework could be made stronger than the current operational
separation framework.

Stronger
price and non-price equivalence

The ACCC in its
submission to the regulatory reform discussion paper outlined the
minimum requirements for a robust functional separation model. In
particular, the ACCC explained how price and non-price terms could
be made stronger than what is required in the current operational
separation regime.

Regarding
equivalence for price terms, the ACCC states that:

‘[p] rice
equivalence measures requiring affiliates pay the same for
their access to the network as wholesale customers. This involves
establishing a transfer pricing system and the preparation of
separate accounts for the ring-fenced affiliates, and retail
affiliates, of the firm that are prepared on the basis of these
transactions. This differs from imputation testing models, as are
used in Part XIB anticompetitive or competition investigations,
which seek to identify for regulatory purposes an implied access
price for affiliates by deducting an estimate of higher layer costs
from average retail prices that are offered. Without ex-ante
separation of the relevant business units, however, there is no
requirement that this implied price must reflect the same tariffs
faced by wholesale customers. Further, there is no requirement
under an imputation testing only model for retail or wholesale
affiliates to account for their use of the network on an arms
length basis. ’—ACCC [55]

For non-price
terms the ACCC states that:

‘[n] on-price
equivalence measures requiring that the same access products
are offered, and the same processes and systems are used to provide
operational support (service qualification and provisioning, fault
handling and billing) to the retail and wholesale customer facing
affiliates and to access seekers. Equivalence in technical quality
is promoted by the use of the same access products, while
equivalent operational quality is promoted by the use of the same
operational support systems. This differs to a more light handed
approach that permits differences in processes provided that
specified measures of relative performance do not differ. This
alternative approach provides less assurance and is dependent upon
robust and encompassing measures being designed and implemented,
and even then permits targeted
discrimination. ’—ACCC [56]

Ring-fencing
arrangements and the oversight and equivalence board

Ring-fencing arrangements
govern staff roles and the transactions between the functionally
separated business units to ensure the separated units operate on a
stand-alone basis, at arm’s length and in the separated
business units’ best interests.

Ring-fencing
arrangements would be much stricter than in the current regime and
new oversight arrangements would apply with the establishment of a
new oversight and equivalence board.

An example of
the stronger ring-fencing arrangements in the proposed functional
separation framework would be that staff in the network and
wholesale business unit would not be permitted to receive
whole-of-business incentives. Localised incentive arrangements are
considered essential in delivering the objectives of functional
separation as in the absence of these requirements employees will
likely seek to maximise group shareholder value (and thereby
discriminate against competitors) to maximise their own
bonuses.

Telstra would establish an oversight and
equivalence board and set its terms of reference in consultation
with the regulator similar to the equivalent oversight bodies that
have been established in both the UK and New Zealand. Some examples
of the roles that the oversight bodies undertake overseas
include:

·
report to the Board and the regulator on matters including when it
becomes aware of a non-trivial breach of the functional separation
obligations or any actions or omissions in terms of compliance with
the obligations;

·
consider and review key performance indicators and report to the
Board and the regulator on a regular basis and in the
company’s annual report compliance with the functional
separation obligations;

·
review performance, carry out investigations, process complaints,
consult regularly with wholesale customers generally and recommend
to the Board and the regulator actions needed to remedy any
concerns with compliance with the separation undertakings;

·
consider codes of conduct for personnel and review and report to
the regulator any requests for exemptions permitted under the
undertaking, making clear whether those requests are supported or
not; and

·
review the supply of the company’s services internally to the
retail business unit.

Stronger and
more direct enforcement provisions

Enforcement provisions will be stronger as a contravention of
Telstra’s functional separation undertakings will be a direct
breach of its carrier licence conditions. This is stronger than the
current operational separation regime. The ACCC explains the weak
and indirect nature of the current enforcement provisions:

‘[i] n terms
of remedying a breach, Telstra’s OSP [operation
separation plan] can be seen to contain a “two strikes
policy”, as the ACCC can only take enforcement action when a
‘rectification plan’ has been contravened, and a
rectification plan would only exist where the Minister has first
required Telstra to prepare such a plan and has accepted
it. ’—ACCC [57]

As stated in
the Telecommunications Act, the pecuniary penalty payable as a
result of a breach of a carrier licence condition by a body
corporate is not to exceed $10 million for each contravention.

Both stronger
ring-fencing arrangements and enforcement provisions will make it
much more difficult for employees to intentionally or
unintentionally circumvent their obligations under functional
separation and create stronger incentives for Telstra employees not
to discriminate against Telstra’s competitors.

The stronger measures just outlined are all
equally important to the effectiveness of a functional separation
regime where the aim is to promote equivalence and
transparency.

The cost of
functional separation

Functional separation
is not without cost and it will be more complex and costly for
Telstra to implement than the current measures. It could also
involve the migration of Telstra’s customers to new systems,
which could potentially affect those customers’ services. It
will be the responsibility of Telstra to minimise customer impacts
during the transition to functional separation.

Cost of functional separation in the United
Kingdom

In 2005, functional
separation undertakings were submitted by British
Telecommunications plc (BT) to Ofcom, the UK’s communications
regulator, in lieu of the possibility of much harsher regulatory
penalties, including structural separation, being imposed given
Ofcom’s findings that BT’s market power was restricting
competition in the sector.

The key features of the BT undertakings were
the establishment of a new business unit, called Openreach,
responsible for the operation and development of BT’s local
access network and that Openreach would support all communications
providers, including BT’s retail businesses, on an equivalent
basis.

Functional separation in the UK is reported to
have cost GBP153 million [58]
to set up. However, substantial benefits were apparent within
12 months of functional separation commencing. The costs to BT were
in relation to the establishment of Openreach and to the
introduction of equivalence of input systems.

A non-price cost was that during the
implementation of BT’s functional separation undertakings,
some customers’ services were affected when BT migrated its
customers to new systems.

Cost of functional separation in New
Zealand

The functional
separation model adopted in New Zealand is based on the BT model
and was implemented to promote competition and increase broadband
take-up in the New Zealand telecommunications markets.

In 2006, a law was passed requiring the
functional separation of Telecom New Zealand. The law, and the
resulting determination, required Telecom New Zealand to separate
into three separate business units—retail, wholesale and
fixed network access service—with the separated business
units all to operate at arm’s length from one another. The
separation process formally commenced on 31 March 2008.

The key difference between the New Zealand and
UK models is that Telecom New Zealand avoided the requirement to
re-develop many of its information technology support systems due
to the fact it was not obliged to provide equivalence of inputs for
legacy wholesale services.

Functional separation is reported to have cost
NZ$200 million. However, benefits have been identified within 12
months of functional separation commencing. It is reported that the
annual operational costs for functional separation is up to NZ$40
million per annum. [59]

Costs on
Telstra

As further details of the functional separation model will be set
out in a determination at a later date, the exact costs that will
be incurred by Telstra cannot be quantified. Telstra reported in
its 2009 full year financial results analyst briefing that
functional separation could take between one to five years to
implement and cost between $500 million to $1 billion.
[60] , [61]

Specifically, Telstra claims that if it is
required to implement a similar functional separation model as to
the one implemented by Telecom New Zealand it would take greater
than one year, cost $500 million and affect its share price by
approximately four cents per share.

Telstra also reports that if it is required to
implement a BT-style functional separation model it could take five
to six years, cost between $800 million-$1 billion or more
with ongoing costs of $50 million-$100 million and affect its
share price by greater than 10 cents per share. Telstra states that
implementing this model would involve a very expensive unwinding of
its information technology systems.

It is unclear what assumptions Telstra’s
claimed implementation costs or effects on its share price are
based on, but it is assumed that much of the incurred cost would be
as a result of initial set up and administrative costs as well as
the required changes to information technology systems.
Telstra’s claims can be assumed to represent the upper bounds
of possible costs.

A separate analysis of the effects functional
separation may have on Telstra’s share price has been
performed by Macquarie research, which is part of the Macquarie
Group, which estimates that:

‘… functional separation would cost Telstra
shareholders between six and 33 cents per share—the lower
figure representing a scenario in which regulatory changes are made
without a National Broadband Network (NBN) being completed by the
Government, the latter including the competitive effect of an
NBN. ’—Macquarie [62]

However,
functional separation does not necessarily have a negative impact
on share price as demonstrated by BT. In 2007, the European
Regulators Group noted that:

‘ [f] ollowing the announcement of the undertakings
in the United Kingdom, BT’s share price increased. After
almost two years, BT has shown a relatively strong share
performance compared with many of its European peers…it is
clear the undertakings entered into by BT were not perceived by the
market as a disincentive to invest.’ —European
Regulators Group [63]

Despite the uncertainty of the effects
functional separation will have on Telstra’s share price and
the ongoing costs it is likely to incur, the initial set up costs
and implementation timeframes for Telstra will be significant.

Costs to the Government

The proposed increased resources for the
regulator will be recovered by increasing the carrier licence
charges.

There is potential over time for the wind back
of work programs concerning Telstra’s operational and
accounting separation as a result of functional separation.
However, it is not possible to precisely identify the reduction of
regulations and work programs at present as a result of these new
regulatory measures.

The benefits of functional
separation

For similar reasons
that functional separation is being proposed in Australia,
functional separation was implemented in both the UK and New
Zealand to promote transparency and equivalence to encourage the
development of retail-level competition and broadband take-up.

The benefits resulting from functional
separation have been significant, in particular in the UK, where
the functional separation of BT had an almost immediate effect on
the state of competition in their telecommunications market.

Benefits of functional separation in the
United Kingdom

The UK experience has demonstrated that functional separation can
deliver competitive outcomes to the benefit of consumers,
businesses and the industry. Consumers in the UK are able to
benefit from lower prices and the development of more innovative
services with the European Regulators Group reporting that:

‘[the]
creation of Openreach [BT’s functionally separated
network and wholesale business unit] prompted a new wave of
investment in the UK electronic communications market, which in
turn triggered a major price war in the retail broadband market and
led to a range of innovative broadband services being offered to
end-users.’— European Regulators Group [64]

Some commentators
have criticised functional separation as compromising investments
by restricting the ability of a vertically integrated operator to
coordinate investment with its retail arm and limiting its
incentive to upgrade the network. This has not been the experience
of BT, with BT stating that:

‘…[t]he provision of equivalence does not stifle
our ability or desire to invest; we have just announced
aâ¤1.5bn investment programme in next generation broadband
with full equivalence. We are amongst the world leaders in this
area .’—BT Global Services [65]

Ofcom, the UK’s communication regulator,
considers that while not the sole contributing factor to increased
competition and benefits experienced by consumers and businesses,
BT’s functional separation undertakings have contributed to
the following outcomes:

‘Fixed
broadband adoption has continued its growth reaching over 60 % of
UK households at the end of 2008 from 41 % at the end of
2005.’

‘Over 5.5
million broadband connections at the end of 2008 were provided by
operators other than BT who have deployed infrastructure at
BT’s local exchanges.’

‘Competition
between 2005 and 2007 led to a fall in the cost of a basket of
residential fixed voice services on average by 10.5 per cent in
real terms each year.’

‘The take-up
of [unbundled local loop (ULL)] services has grown from less
than 200,000 lines in Q3 2005 to over 5.5 million lines at the end
of December 2008, equating to approximately 32 per cent of all
(cable and ADSL) fixed broadband connections.’

‘BT’s
share of wholesale broadband access (ADSL and cable) fell from 71%
at the end of 2005 to 47% at the end of 2008.’

‘BT’s
retail share of (residential and SME) broadband connections stood
at around 27 per cent at the end of 2007 which is one of the lowest
incumbent operator market shares in the OECD, with the exception of
North America.’ —Ofcom [66]

The results from the UK experience are
positive as illustrated by the statistics just stated. Of
particular note is that broadband adoption has grown significantly,
while BT’s market power has diminished substantially and
fixed voice prices have decreased as a direct result of the
increased competition in the market.

As demonstrated by the following analysis and
table from the Strategy and Policy Consultants Network, the UK has
stronger broadband take-up and a higher proportion of its
subscribers use higher bandwidth connections than Australians. It
is therefore expected that Australia will improve its broadband
penetration rate and the percentage of subscribers using
higher-speed broadband connections as a benefit of the increased
level of competition in the sector due to stronger separation
measures for Telstra.

‘ Broadband Penetration: Australia’s level of
penetration is 25.4% against 28.5% in the UK. However, penetration
is strongly and positively associated with Gross Domestic Product
(GDP) per capita: the higher the GDP per capita, the higher the
level of penetration. If we correct for GDP per capita we find that
penetration is (sic) Australia 2.28 percentage points below the
level we would expect whilst the UK is 2.18 percentage points above
the level we would expect .’—Strategy and Policy
Consultants Network [67]

Percentage of
Australian and UK subscribers per bandwidth.

Bandwidth

Proportion of
Subscribers

Australia

United Kingdom

512 kbps and below

44%

4.3%

512kbps-8mbps

33%

89.3%

More than 8 mbps

23%

7.2%

Source: Strategy
and Policy Consultants Network, Preventing Discrimination in the
Australian Broadband Market.

Another important point is that the take-up of
unbundled local loop services has grown dramatically since the
introduction of functional separation. Unbundled local loop
services are an essential service to foster competition on the
existing fixed-line copper network and require the incumbent to
lease at cost part of its local assets to competitors. The dramatic
increase in take-up of this essential service demonstrates the high
level of confidence competitors have that the functional separation
regime results in them being treated in a non-discriminatory way by
the incumbent which has given them confidence to invest in the
market.

Functional separation has
had a positive net effect in the UK with its telecommunications
regulator, Ofcom stating that:

‘[s] ince our last review, and nearly four
years on since the [BT functional separation] Undertakings
were given, our annual evaluation continues to indicate that the
net effect of the Undertakings to date, both for competition and
consumers has been positive. ’

‘ Given the substantial benefits
the Undertakings have delivered to retail and wholesale customers
to date, we continue to remain of the view that the Undertakings
are an appropriate and comprehensive solution to the competition
concerns that we set out in the TSR [Strategic Review of
Telecommunications] . ’—Ofcom [68]

Furthermore, the benefits of functional
separation are displayed earlier in this regulatory assessment
where the UK is superior to Australia in most key international
telecommunications indicators stated regarding price, take-up rates
and the state of the sector’s competition.

Benefits of
functional separation in New Zealand

Functional
separation in New Zealand is in its early days but there appears to
be early benefits as a result of its implementation.

‘Telecom’s share of the retail broadband market has
continued to decline and now sits at 57 percent of total broadband
connections compared to 61 percent at the end of 2007…the
2006 legislative reforms continue to have a positive effect on the
fixed line telecommunications markets and are likely to show
further gains in 2009.’ —New Zealand Commerce
Commission [69]

In addition,
functional separation in New Zealand has seen a marked change in
Telecom New Zealand’s behaviour towards its wholesale
customers.

‘Operational separation [the equivalent of functional
in the Australian context] of Telecom NZ has been a huge
success. It is all positive; there are no negatives.

From the moment the
government announced the separation plan on 3 May 2006, Telecom's
behaviours in the market place changed. Before separation it viewed
its wholesale customers as unwelcome campers on its network. The
moment separation became inevitable, it immediately started to
recognise them as valued business partners.’ —speech
by Dr Ross Patterson, Telecommunications Commissioner, New Zealand
Commerce Commission [70]

Changing the incumbent’s attitude
towards its wholesale customers, not just because of the regulation
imposed, but for the incumbent to see the true value of its
wholesale customers as equal business partners, is a major outcome
for the functional separation regime implemented in New
Zealand.

Reduction of regulation

The increased competition resulting from functional separation
could reduce the need for other forms of regulation, such as retail
price controls. For example, in the UK, Ofcom has reduced
BT’s retail price controls, as a result of the benefits from
functional separation due to the increased level of retail level
competition in the market. However, such a reduction of regulation
could only occur once a fully competitive retail market was
established.

8. Overall assessment of functional separation

Functional separation is the next best option to structural
separation and will go some way in providing equivalence and
thereby further promoting competition in the sector.

Currently, reviews of
regulatory frameworks are being contemplated in many overseas
markets as a regulatory remedy to ensure competition prevails. In
its 2009 Communications Outlook publication, the Organisation for
Economic Co-operation and Development (OECD) states:

‘ …functional separation of integrated incumbent
operators should be part of the policy toolkit available to
regulators to use, as a last resort measure, if other possibilities
to create competitive markets have not been
successful… [and] regulatory frameworks, which had
reached a certain stability and maturity during the last decade,
are in many cases being reviewed in order to ensure that
competition prevails .’—OECD [71]

As stated earlier the competitive
telecommunications market that was envisaged is not emerging due to
Telstra’s level of integration and incentives to favour its
own retail business compared to its wholesale customers. The
proposed functional separation framework will go a long way to
altering Telstra’s incentives and its behaviour when
providing access to services for its wholesale customers.

Even though
functional separation is seen as the second best option to
structural separation, it will be supported by Telstra’s
competitors as they will be able to compete with Telstra on more
level terms than currently. As a result, competitors will have the
confidence to invest in the market, which will see greater
innovation, lower prices and more choices for consumers.

That being said,
the ongoing cost to the competition due to Telstra’s vertical
integration affects all Australians and the economy more generally
through higher telecommunications prices and reduced innovation and
investment in the sector. Also any costs incurred to Telstra as a
result of functional separation may not be as significant as other
systems costs that are part of the costs of doing business. For
example, in recent years Telstra has reportedly spent in excess of
$10 billion [72]
on next generation networks (including wireless) systems and over
$1.5 billion [73]
on its recent information technology transformation project.

It is the
Australian Government’s considered view that the medium- and
longer-term competition benefits for the economy, business and
end-users of implementing functional separation outweigh the
short-term costs to Telstra of implementing functional separation
if Telstra decides not to voluntarily structurally separate.

9. Telstra’s horizontal integration

The problem being addressed

In the past, concerns have been expressed by a
range of stakeholders that Telstra’s control of the only and
near ubiquitous copper fixed line network, the largest cable and
mobile networks and 50 per cent of Foxtel has reduced the
development of competition in Australia in comparison to other
countries and has contributed to Telstra’s dominance in the
market.

Compared to most other countries,
Telstra’s level of integration is unique. For example,
in most other developed countries there are restrictions on
incumbents from owning both cable and traditional fixed-line
telephone networks.

Unlike Australia, in a range of countries the
fixed-line incumbent does not also own the largest mobile carrier
as measured by market share.

Telstra’s
ownership of the two largest fixed line networks in Australia has
limited competitive tension in the telecommunication sector, and
therefore choice for consumers with the ACCC stating in 2003
that:

‘…Telstra’s control of both a copper and a
cable network and the lack of competitive discipline it faces as a
result of this dual ownership, means Telstra is in a position to
largely dictate the type of services that consumers will be able to
access and the time at which these services become
available.’ —ACCC [74]

In addition to Telstra’s control of
fixed line networks, Telstra’s 50 per cent stake in Foxtel
has hindered competition in both the telecommunications and pay-TV
markets. This is because Telstra has the incentive to base its
decisions on its interests in both the telecommunications market
and its pay-TV interests. As a result, new products that a
pure media company or a pure telecommunication wholesaler might
offer are potentially not being made available to consumers.

Why Government action
is needed

The
Government’s clear objective is to promote competition in the
sector which is in the interests of all Australian consumers,
businesses and the economy more broadly and is why the Government
has established a framework for Telstra to voluntarily divest
itself of its interests in Foxtel and its hybrid fibre coaxial
cable network and creating a mechanism to prevent Telstra from
acquiring spectrum for advanced wireless broadband.

Australia is one of the few countries that has
allowed its telecommunications incumbent to own a hybrid fibre
coaxial cable network. In many other countries, including within
the European Union, there are restrictions on incumbents that own
the fixed line telephone network also owning cable networks (See
Appendix B for a list of countries where restrictions have been
placed on the incumbent’s involvement in the Pay TV sector,
source: Optus).

The divestment of certain
assets to be allowed to participate in other market segments or to
avoid regulation is not unfamiliar in the telecommunications
sector. For example, for the merger between the European
telecommunications providers Telia and Sonera, the European
Commission directed Telia to divest its cable network in
Sweden. [75]
While in the UK,

‘BT
divested itself of its mobile business in 2001 to simplify its
business, and since then the company’s performance has gone
from strength to strength…’— Ovum [76]

The issues
surrounding Telstra’s ownership of Foxtel

Optus contends that Telstra’s investment in Foxtel represents
a significant threat to competition:

‘ Telstra’s fifty per cent
ownership in Foxtel has been recognised to have caused significant
distortions in the development of the Pay TV market within
Australia, with associated impacts on the telecommunications fixed
line services market. ’—Optus [77]

The impacts and
distortions in the development of the respective markets are
difficult to quantify, however, problems arise because content can
provide telecommunications service providers with new
high-value business opportunities and further stimulates
demand for their carriage services. Exclusive access to content
creates an effective means of locking customers in. Further
lock-in can be achieved through the bundling of services
(i.e. selling two or more types of services together at a discount
rate). Access to content on an exclusive basis limits the
opportunities available to competitors, in both the carriage and
content sectors.

Because of
Telstra’s stake in Foxtel and its ownership of the largest
hybrid fibre coaxial cable network, Telstra has the incentive to
seek to restrict the supply of Foxtel Pay TV channels to other
networks competing with Telstra for the supply of
telecommunications services and to hinder other Pay TV businesses
from accessing Telstra’s cable network. The Seven Network in
its submission strongly supports Telstra being required to divest
its ownership of Foxtel arguing that competition has suffered
as:

‘ [t] he
[Australian] pay TV sector is characterised by the absence of
any effective competition. The barriers to entry are now such that
the marketplace is highly unlikely to deliver any real or
sustainable competition in the future.’— The Seven
Network [78]

Telstra choosing
to divest its Foxtel interests could see new entrants into the Pay
TV sector with new channels providing greater choice for consumers.
It could also see increased competition in the telephony and
broadband markets as Pay TV services could be bundled with other
telecommunications providers.

A number of submitters to
the regulatory discussion paper argued for Telstra to divest its
Foxtel interests including:

‘ …Telstra should be required to
immediately divest its interests in
Foxtel. ’—Macquarie Telecom [79]

‘ TransACT would encourage the government to consider...
horizontal separation, by requiring Telstra to divest its 50%
interest in FOXTEL… ’—TransACT [81]

‘ Competition policies dictate that Telstra must be forced
to divest its ownership interest in
Foxtel. ’—Primus [82]

‘ The
CCC submits Telstra should be required to divest itself of its
interests in the HFC cable and
Foxtel... ’—Competitive Carriers Coalition [83]

Optus also submits that
Telstra’s stake in Foxtel will be significant into the
future. The reason being as consumers move to higher speed
broadband services, such as those offered by the NBN, IPTV and the
associated content are likely to be key drivers for the take-up of
these higher speed services. That is:

‘ …control of content will become
increasingly critical, since it will become a crucial factor in
customer’s purchasing
decisions. ’—Optus [84]

The ACCC’s Chairman
Mr Graeme Samuel has also noted the reasons why control of content
could stifle competition:

In contrast, Telstra in
its submission argued that the presence of telecommunications
carriers in media markets promotes the traditional media policy
goal of diversity and plurality and:

‘ …the
existing legal and regulatory frameworks for cable networks, media
and content, contain strong safeguards to prevent
anti-competitive conduct and the misuse of market power…The
Foxtel content sharing agreement with Optus and Foxtel’s
undertakings to the ACCC, for example, have helped secure the
industry’s financial sustainability and ensured that pay TV
content is accessible across platforms and
providers. ’—Telstra [86]

Foxtel did not address
its possible divestment by Telstra in its submission to the
regulatory reform discussion paper. It did state that it:

‘ …would be particularly concerned that a new
regulatory regime may be introduced to deal with perceived concerns
with Telstra and that this regime may end up having wider
application… [and] is also concerned…on the
need to prohibit one company from buying a media asset
fundamentally misunderstands the way in which the content supply
market operates as well as misunderstanding the implications of
broadband… [and] is not aware…that access to
content has foreclosed competition or otherwise acted as a barrier
to entry or that this has caused a lack of investment in facilities
or the subscription television industry.
’—Foxtel [87]

Austar in its submission
notes the ability of a dominant telecommunications operator to
reinforce its dominance not just through subscription television
services but also in the broadband market is an issue:

‘ The issue
is the potential for a powerful telecommunications operator to
exploit its power in the platform delivery market to close off
content competition, not just in subscription television, but also
in broadband service acquisition. We have already seen this in the
exclusive content deal that Telstra did for AFL rights for its
Bigpond internet service. As the lines between platforms begin to
blur as true “convergence” takes hold, the ability for
a dominant telco operator to dominate this space and use content
rights to reinforce that dominance become even more
concerning. ’—Austar [88]

With the
Government’s aim for the NBN to deliver superfast broadband
to all Australians and a fully competitive telecommunications
market, Telstra’s divestment of Foxtel would improve the
environment for a competitive market to develop.

The lack of
infrastructure based competition in the past due to Telstra’s
ownership of a hybrid fibre coaxial cable network

Telstra’s
ownership of the largest cable network means that, along with its
fixed line copper network, it owns the two most significant fixed
line communications platforms in Australia.

Divestment of the cable network could provide
the basis for additional infrastructure-based competition for
the provision of voice, broadband and subscription television
services in metropolitan areas where this cable footprint
exists.

In their
respective regulatory submissions Macquarie Telecom, Primus and the
Competitive Carriers Coalition all argued for Telstra to be
required to divest its cable network. Telstra, Foxtel, Optus and
the Communications, Electrical and Plumbing Union argued against
divestment. Optus stated that Telstra’s cable network should
reside in the company that will be created as a result of
Telstra’s structural separation (Optus in its submission
provided a structural separation model for Telstra where Telstra
would be required to divest its network and wholesale functions to
a separate company not owned or controlled by Telstra).

Telstra’s
access to spectrum

To promote
competition across the various telecommunications platforms, the
Government is proposing legislative measures that will provide
Telstra with the flexibility to choose its future path.

In the previous Bill, the Government proposed
that Telstra would not be able to acquire spectrum for advanced
wireless broadband while it remains vertically integrated,
maintains its interest in Foxtel and owns a hybrid fibre coaxial
cable network. However, if the Minister was satisfied that any
concerns arising from Telstra’s market power were
sufficiently addressed by Telstra’s undertaking to
structurally separate, the Minister would have been able to exempt
Telstra from the requirements to divest its interests in Foxtel
and/or its hybrid fibre coaxial cable network. This reflected the
view that an appropriate form of structural separation may address
the concerns in relation to Telstra’s level of horizontal
integration.

In light of Telstra’s clear commitment
to structural separation as evidenced by its decision to enter into
a Financial Heads of Agreement, Telstra would only be prevented
from acquiring specified bands of spectrum if the Minister imposes
such a restriction in a legislative instrument.

The availability of spectrum has been
essential in encouraging competition between different
technologies, as well as different service providers of mobile
services.

Availability of spectrum is becoming
increasingly important for telecommunications as the use of
wireless broadband and mobile technologies such as 3G increases.
The prospect of new technologies—such as Long Term
Evolution—which allow for more bandwidth-intensive
applications will further increase this demand.

The allocation of spectrum is carried out
under the Radiocommunications Act. Currently, when spectrum becomes
available, it can be sold through auction, with licence periods of
up to 15 years. Secondary trading in spectrum is permitted.

Over coming years, the Government will
consider the allocation of spectrum made available through the
staged cessation of analog television in the transition to digital
television, the expiry of licences for spectrum currently used for
mobile telephone services and any changes to the use of spectrum
currently used for electronic news gathering.

The Government recognises that the future
demands will place pressure on the available spectrum.

Competition limits have been imposed on
existing carriers in Australia in the past. Specifically,
t he applicable Ministers have used their
directions powers under section 60 of the Radiocommunications
Act 1992 to apply competition limits to particular spectrum
licence auctions five times. [89]

The relevant spectrum Telstra could
potentially be prevented from acquiring is the broadcasting
spectrum and spectrum used for electronic news gathering. Telstra
would not be prevented under this rule from re-acquiring spectrum
it currently uses for mobile telephone services.

Telstra in its submission
did not support the proposal to prevent it from accessing the
spectrum that is required for the provision of next generation
wireless services. [90]
Hutchison also did not consider competition limits appropriate on
spectrum unless the Government identifies clear quantifiable net
social benefit from restricting competition for newly available
spectrum. [91]
Whereas the ACCC states that:

‘[a] lthough
Telstra has voiced concerns over the use of competition limits
… the ACCC considers they can be an effective mechanism to
promote competition. ’ —ACCC [92]

The Digital Economy
Industry Work Group [93] ,
Optus and Unwired in their regulatory reform submissions also
stated that competition restrictions should be considered to
spectrum auctions with Optus and Unwired stating:

‘ Optus submits that competition limits on
spectrum allocations should be
considered … ’
—Optus [94]

‘[f] uture competition limits on spectrum allocation should
be based on the market power of

The Government’s
objective is to address Telstra’s ability to discriminate
against its competitors, promote competition across the various
telecommunications platforms, and provide Telstra with the
flexibility to choose its future path.

11. Government’s policy to address Telstra’s horizontal
integration

The Bill creates a framework for Telstra to nominate which markets
it participates in by addressing its vertical integration by either
voluntarily structurally separating or implementing functional
separation. The Bill also provides a framework for Telstra to
voluntarily divest its interests in Foxtel and its hybrid fibre
coaxial cable network. If the Minister remains concerned
about the degree of Telstra’s power in telecommunications
markets he may make an instrument preventing Telstra from acquiring
spectrum for advanced wireless broadband.

The Government is not imposing any regulation on Telstra to
structurally separate or divest its Foxtel or hybrid fibre coaxial
cable network interests. Telstra will have a choice to divest these
assets.

Therefore the
intention of this section is to outline the potential costs, where
possible, to Telstra and the Commonwealth if Telstra decides to
divest these assets or if Telstra is prevented from acquiring
spectrum if the Minister has determined in the legislative
instrument.

All the costs
identified are estimates only.

Estimated cost
of Telstra’s divestment of Foxtel

Foxtel has 1.63 million direct and wholesale subscribers. It has
been reported that Foxtel is worth $3.5 billion, with revenue
reaching $1.84 billion and posting a pre-tax profit of
$135 million for the year ended 30 June 2009. [96] , [97] , [98]

If Telstra divests
its Foxtel interest it will lose the associated profits from the
cable TV provider and the strategic benefit to its
telecommunications business in owning a premium content provider.
However, it is not possible at this time to accurately state how
much Telstra would lose or gain in divesting its 50 per cent stake
in Foxtel, which would partly depend on the revenue from the
sale.

Costs would also
be incurred by the Government in assessing the Foxtel divestment
undertakings, however at this point in time it is not clear what
these costs will be.

There are financial costs involved in Telstra divesting its hybrid
fibre coaxial cable network in terms of securing market value for
the asset.

In its financial
analysis of the NBN, Deutsche Bank stated that the estimated
‘book value’ of Telstra’s cable network is
approximately $3.6 billion or $1450 per home passed, while the
market value is in the vicinity of $1.25 billion or $500 per home
passed. This could be a direct cost to Telstra in the vicinity of
$2 billion if Telstra sells its network at current market value.
Another cost is that Telstra would lose revenues received from
Foxtel for use of the cable network, which is estimated to be $80
million per annum, but this is a low margin offering. [99]

Deutsche Bank also
estimate that if Telstra divests its hybrid fibre coaxial cable
network at market value and a successful NBN is built, the
estimated value of Telstra’s share price will be $3.70 per
share.

Costs will also be
incurred by the Government in assessing the divestment
undertakings, however at this point in time it is not clear what
these costs will be.

Estimated cost
of preventing Telstra from acquiring spectrum

There could be a cost to the Commonwealth Government if Telstra did
not participate in spectrum auctions due to the loss in competitive
tension.

At this point in
time, it is not possible to predict the potential loss in revenue
to the Commonwealth.

It is also not
possible to estimate the potential loss in revenue for Telstra as a
result of not acquiring spectrum and not providing advanced
wireless broadband services.

Telstra’s level of horizontal integration across the
different delivery platforms—copper, cable and
mobile—is in contrast to many countries where there are
restrictions on incumbents owning both cable and traditional
fixed-line telephone networks. Unlike Australia, in a range of
countries the fixed-line incumbent does not own the largest mobile
carrier as measured by market share. Telstra’s horizontal
integration has significantly contributed to Telstra’s
ongoing dominance in the Australian telecommunications market.

However, the
Government has welcomed Telstra’s announcement that it is
pursuing structural separation through the progressive migration of
customer services from its copper and subscription television cable
networks to the new wholesale-only fibre network to be built and
operated by NBN Co. Such an outcome would deliver the envisaged
structural reform of the telecommunications sector.

As a result, the
Bill now provides more legislative certainty for Telstra in the
transition to fundamentally changing its business structure to a
retail company. The Bill now sets out a mechanism so that Telstra
would be allowed to acquire specified bands of spectrum, unless the
Minister determines in a legislative instrument otherwise. This
recognises the fact that Telstra’s proposed structural
separation will also address the issues surrounding Telstra’s
horizontal integration.

Relatively weak. General equivalence obligation on service
quality, KPI reporting on connections, faults and billing but does
not necessarily translate into services delivered.

Much stronger. Requirements to use the same regulated wholesale
products, at the same prices and using the same transactional
systems/processes, as BT’s retail activities. KPI reporting
on provision and repair for wholesale line rental, ULL, IPstream,
and billing.

Much stronger. Requirements to offer same products and services
at both the wholesale and retail levels and use same processes as
wholesale KPI reporting on connections, faults and billing to
demonstrate equivalence of inputs.

Telecom Italia was prohibited to enter the
terrestrial broadcasting market.

Japan

NTT and KDD were prohibited from providing
cable TV service.

The Netherlands

KPN (the holding company of the incumbent PTT
Telecom) is not allowed direct provision on cable TV
infrastructure. The incumbent sold its shareholdings in cable
companies at the insistence of the regulator.

Spain

Telefonica was prohibited from entering into
cable telephony (1997-1999).

United Kingdom

Cable operators were initially granted
exclusive geographical licences to provide pay TV services. BT and
Mercury were not permitted to enter the Pay TV business. BT was
prohibited from involvement in broadcasting by Duopoly Review 1991
(effective from 1991-2001).

US

Incumbent telcos were barred from providing
video service in all but the most rural areas and similarly cable
operators is (sic) limited to providing subscription TV -
known as the Cable Communications Policy Act 1984 (effective
from 1984 to 1996).

REGULATION IMPACT
STATEMENT

REFORM OF PART XIC
OF THE COMPETITION AND CONSUMER ACT 2010 (NETWORK ACCESS
ARRANGEMENTS)

1. Issues which give rise to the need for action

In order to obtain
improved outcomes for consumers, a competitive market for
telecommunications services must be established. Competitors’
access on reasonable terms to services that are necessary for the
supply of retail services is an essential element of this
objective. The current access regime has failed to adequately
provide such access in a timely fashion.

Background

Under Part XIC of the
Competition and Consumer Act 2010 the Australian Competition
and Consumer Commission (ACCC) has the power to
‘declare’ specific telecommunications services to be
subject to the access regime.

Once a service is
declared, a telecommunications provider that supplies the declared
service (an access provider) is obliged to supply it to other
telecommunications service providers (access seekers) on request
(subject to certain exceptions). After it declares a service, the
ACCC is required to issue non-binding ‘pricing
principles’ for that service.

The price and
non-price terms on which a declared service is supplied are
determined by the following means:

·
negotiation and agreement between the access provider and the
access seeker; or

·
if negotiation fails, the terms are as specified in:

o an access
undertaking previously lodged by the access provider and accepted
by the ACCC, or

o in the
absence of a relevant undertaking that specifies the terms of
access, a determination by the ACCC following arbitration.

This is known as the
negotiate-arbitrate model. This approach was chosen over more
direct methods of setting access terms in order to encourage
market-based outcomes. However, in practice determining terms and
conditions of access under Part XIC has proven to be time-consuming
and litigious.

Part XIC also provides for:

·
the ACCC to determine model terms and conditions for certain
‘core services’;

·
the granting of exemptions, for existing services and for services
that are not yet declared (to encourage investment in new
telecommunications infrastructure);

·
the Minister to make a determination setting out pricing principles
(which apply to undertaking and arbitration decisions); and

·
applications to be made to the Tribunal for review of exemption and
undertaking decisions.

The exercise of the
regulatory powers of the ACCC in Part XIC, including the power to
declare services, is governed by consideration of the long-term
interests of end-users (LTIE). In deciding whether something is in
the LTIE, the ACCC must consider whether it is likely to
promote:

·
competition;

·
any-to-any connectivity (i.e. communication between users of
services over different networks); and

·
the efficient use of, and investment in, telecommunications
infrastructure.

The
negotiate-arbitrate model has proven to be complex and delay-prone.
Each access dispute has to be arbitrated individually - even
if it is very similar to disputes that have previously been
arbitrated. For instance, an arbitration relating to one of
the most important declared services, the unbundled local loop
service (ULLS), which commenced in early 2005 was not finally
decided by the ACCC until December 2007, despite the Commission
having made numerous earlier statements on ULLS pricing. Rather
than encouraging flexible negotiation, the process has been a
source of uncertainty and delay for access seekers.

It was originally
envisioned that, as the access regime became well-established, new
entrants would compete successfully with the incumbent provider
(Telstra) and gradually invest in their own infrastructure, perhaps
eventually replicating Telstra’s network and thus eliminating
the economic bottleneck comprising Telstra’s fixed line
customer access network. While significant investment has taken
place, this outcome is nowhere near being achieved. ACCC figures
for 2009 show that out of over 5000 Telstra exchanges, only 541 (10
per cent) have had competitors’ facilities installed.
Regulatory uncertainty appears to have played a part in curbing
more extensive investment by competitors.

Problem

The
negotiate-arbitrate model within the telecommunications access
regime has been extensively criticised by a range of stakeholders
across the industry. Access seekers have been the primary critics,
but the ACCC and bodies such as the Internet Society of Australia
have also expressed grave doubts that the regime is achieving its
aims.

Stakeholders’
main areas of concern have been that the negotiate-arbitrate model
is very slow, cumbersome and open to gaming (if not outright
obstruction), and that Part XIC in its current form does not
provide sufficient regulatory certainty for investment. It is
ineffective largely because it has not effectively constrained the
incentive of the vertically-integrated Telstra to provide access to
its network on terms that are not as favourable as those it
supplies to its own retail business.

The
telecommunications sector is characterised by disputation to a
greater extent than other industries where negotiate-arbitrate
access regimes operate. The litigious nature of the
telecommunications sector in Australia is illustrated by the fact
that:

·
as of mid-October 2010, 164 telecommunications access disputes had
been notified since the commencement of the Part XIC regime in
1997. This can be contrasted to four access disputes that have been
notified in other sectors (in respect of two gas pipelines, Sydney
airport, and a sewerage service);

·
a large number of these disputes have involved broadband inputs;
and

·
in recent times, judicial review has been sought in respect of
almost all final arbitration determinations made by the ACCC
(mostly by Telstra).

While disputes in
different regulated industries cannot be directly compared, the
number of arbitrations requested and the regular reoccurrence of
the same access issues lead the Government to conclude that the
process is not working as intended and is prone to excessive delay.
Telstra is the main beneficiary of this delay and disputation, as
it retards the rollout of competing services. Investment in new
infrastructure is similarly inhibited by regulatory uncertainty.
More than a decade after the introduction of competition, Telstra
remains dominant in almost all sectors of the telecommunications
market, and it continues to be one of the most profitable operators
in the world. The use of regulatory and legal processes appears to
be one way in which Telstra maintains this dominance.

Contributing factors
include that:

·
the ACCC cannot set binding terms of access up-front when a service
is declared, but has to wait until an access dispute is referred to
it for arbitration;

·
arbitration proceedings can take a long time, sometimes years;

·
when arbitrating an access dispute, the ACCC cannot determine terms
of access collectively for all access providers and access
seekers—its arbitrations are only binding on the parties to
the arbitration; and

·
there are multiple steps at which parties can challenge procedural
matters and seek judicial review.

The undertaking
process is also seen as ineffective by a range of
stakeholders. In total, 36 undertakings have been submitted.
Five of these have been accepted by the ACCC (three relating to pay
TV services); six were withdrawn prior to the ACCC making a final
decision. Five of the decisions to reject an undertaking were
appealed in the Tribunal, all of them were unsuccessful.

Voluntary access
undertakings were intended to provide an opportunity for increased
certainty for access providers, as well as the flexibility to
develop their own terms of access for approval by the ACCC.
However, certain stakeholders have argued that, instead of the
undertaking provisions being used to provide certainty, they have
been used to create delays in regulatory processes, and have
resulted in a situation where ‘serial’ undertakings are
lodged (i.e. repeated undertakings with only minor changes made
from previous submissions, even when it is clear that the terms
proposed will not be acceptable to the ACCC; this simply delays the
process of reaching a proper outcome).

Every undertaking
must be considered on its merits by the ACCC. To date the ACCC has
rejected most of the undertakings that have been submitted to it on
the basis that it was not satisfied that the undertakings met the
relevant legislative criteria. To date, no decision to reject an
undertaking has been successfully appealed in the Australian
Competition Tribunal.

The deficiencies of
the current regime have hindered competitive access, and this has
the effect of deterring innovation and investment, thus having a
negative impact on the range and price of telecommunications
products offered to Australian consumers.

2.
Objectives

The
Government’s objective is to facilitate the delivery of
affordable, high quality, innovative and reliable
telecommunications services in a sustainable competitive market.
Outcomes for end-users of telecommunications services will be
significantly improved through a regulatory process for access to
telecommunications services that operates in a timely and efficient
manner and provides a reasonable degree of regulatory certainty for
access providers and access seekers.

3.
Options

The two main options
for reform available to the Government are:

A. retain the current regime, but make it work more
effectively; or

B. replace the negotiate-arbitrate model with a streamlined
process.

Option A—Retain the current Part XIC
processes—including the negotiate-arbitrate model—but
make them work more effectively

Under this approach the
current regulatory processes, including the negotiate-arbitrate
model, would be retained. However, changes would be made to reduce
delays and opportunities for gaming and to encourage the effective
use of undertakings. These changes would include:

·
limiting opportunities to challenge procedural matters by exempting
certain decisions (e.g. interim access determinations) made by the
ACCC from judicial review by the Federal Court;

·
enabling the ACCC to request a party who lodges an undertaking to
vary it without requiring the party to lodge a fresh undertaking
and effectively ‘restart the clock’ on an already
lengthy process;

·
placing a time limit on the ACCC for finalising an arbitration;
and

·
allowing the ACCC to specify pricing methodologies for declared
services which would be used to determine prices over successive
regulatory proceedings or successive undertakings in order to
create greater regulatory certainty.

Option B—Replace the Part XIC negotiate-arbitrate model
with a streamlined regulatory process

This approach would
replace the negotiate-arbitrate model with a streamlined regulatory
process and provide the ACCC with the ability to make up-front
determinations on price and non-price terms of access. Under the
new process:

·
the ACCC would determine up-front price and non-price terms and
conditions (the access determination) to apply, in general, for a
three to five year period;

·
the access determination would apply to all access providers and
access seekers of the declared service (although the access
determination could specify different terms of access for different
access providers and/or access seekers);

·
access providers and access seekers could agree to different terms
of access from those in the access determination;

·
the ACCC would have the power to determine fixed principles to
apply for a stated period which may extend beyond the duration of
the access determination (e.g. how depreciation is treated);

·
the ACCC would have the power to make binding rules of conduct for
the supply of declared services which would apply either in
addition to, or as a variation of, an access determination.
Such rules could address particular competition issues, such as
inadequate exchange access processes or service migration
processes;

·
there would no longer be ordinary exemptions from access
obligations and no ordinary access undertakings;

·
the ACCC would have the power to request a party that lodges a
special access undertaking to vary the undertaking without having
to lodge a new undertaking; and

·
merits review would not be available for decisions under Part
XIC.

Suitable transition
arrangements would be developed for existing declared services.

4. Impact
assessment

This section discusses the costs and benefits
of the two alternative options put forward in terms of the impact
on business, the Government and consumers. It is not possible to
precisely quantify the costs and benefits for any party, though
both options would, to varying degrees, reduce the amount of
resources expended in regulatory processes and
litigation.

Option
A—Retain the current Part XIC processes—including the
negotiate-arbitrate model—but make them work more
effectively

All the proposed reforms under this option would operate to
simplify the access regime, and in theory this would allow disputes
to be settled more quickly and leave less opportunity for decisions
to be appealed. Access seekers would benefit most, and they would
have greater confidence in achieving speedy outcomes. However, many
avenues would remain open for access providers to
‘game’ the system to their advantage, and the ACCC
would probably still have to deal with a significant number of
disputes.

Eliminating the right to apply for judicial
review of interim access determinations could reduce uncertainty
and delay.

In the absence of
more sweeping changes to the negotiate-arbitrate model, imposing a
time limit on decision-making by the ACCC is one way to encourage
all participants in a dispute to avoid time-wasting. This approach
is taken by the British regulator, Ofcom, which has four months to
resolve disputes.

At present the ACCC
is obliged to re-examine all matters involved in making an
arbitration determination or undertaking when it expires, even
issues that are well-established (such as network costs,
depreciation or a regulatory asset base). Allowing the ACCC to
specify certain matters for a longer period than the duration of
the arbitration determination or undertaking concerned would save
having to undertake such re-examination and would provide
longer-term investment certainty for all parties. It could
also prevent parties from re-opening long-standing arguments over
pricing in an attempt to slow down proceedings.

As noted earlier,
almost every undertaking submitted to the ACCC has been rejected
- in several cases (notably the ULLS), the same basic
undertaking has been knocked back multiple times in slightly
altered form. By proposing more streamlined regulatory processes,
access providers may be encouraged to avoid going to arbitration
and instead submit better undertakings up-front. The fewer the
avenues there are for delay, the more likely this is to happen.

While all of these
proposed changes should simplify regulatory processes and have the
potential to produce financial savings for the ACCC and industry,
the primary benefit would be to increase certainty and lower
obstacles to achieving competitive access to key bottleneck
services. However, this option would still be vulnerable to
regulatory gaming by parties that see an advantage in refusing to
negotiate terms and using the arbitration process to protect their
commercial interests.

Benefits:

·
Should expedite decisions and dispute resolution, which will lower
costs and increase certainty in the market.

·
May encourage access providers to lodge undertakings that are
likely to meet statutory criteria and be accepted by the ACCC.

·
Broadly maintains the status quo, reducing disruptive costs.

Costs:

·
Does not address the central criticism that the negotiate-arbitrate
model can continue to be used to delay regulatory decisions.

·
Even under a modified system, the industry may well suffer from a
surfeit of long, expensive regulatory actions and administrative
appeals, if providers see some benefit to engaging in them.

·
Applicants will continue to be able to use the undertaking process
to force the regulator to re-examine the same issues multiple
times.

While this option would have relatively little
cost and result in moderate benefits to industry, it would not
resolve most of the issues identified as requiring attention.

Option
B—Replace the Part XIC negotiate-arbitrate model with a
streamlined regulatory process

This option would
much more directly address the deficiencies of the current regime
and would greatly reduce disputation regarding access. The costs to
the industry would be minimal, as the ACCC would be able to set
price and non-price terms for a range of services up-front without
need for lengthy and repeated adjudications. Operators could still
commercially negotiate their own terms of access, but there would
be an up-front access determination to fall back on.

Evidence provided by
access seekers (including Optus, Primus and the Competitive
Carriers' Coalition) suggests that access disputes can cost access
seekers hundreds of thousands of dollars per dispute, while Optus
estimates that the overall cost to industry of regulatory
proceedings over the last 12 years is at least $200 million.

Merits review, which
currently applies to a limited number of Part XIC decisions (but
not service declarations and access determinations), would be
abolished under this option. Introducing merits review for access
determinations or maintaining it for other Part XIC decisions would
substantially negate many of the benefits of this option as it
would defeat the objectives of timely outcomes and greater
regulatory certainty. However access to judicial review will
continue to be available.

Under the proposed
changes, an access determination process would proceed in the
following manner:

1.
The ACCC would declare a service, and set standard price and
non-price terms of access for the declared service in an access
determination.

2.
An access provider would be obliged to offer the declared service
to any access seeker on the terms set down in the access
determination. The two parties could still negotiate different
terms.

3.
The ACCC would be able to specify in the access determination fixed
principles for treating certain on-going matters such as the
depreciation methodology or the regulatory asset base, which could
be set for a longer duration than the duration of the access
determination.

4.
The ACCC would not be able to issue ordinary exemptions from the
access obligations as it can now; however anticipatory exemptions
would still be available.

·
The industry would need to adjust to having a regulator with
expanded powers to impose price and non-price terms on operators
up-front.

·
The regulator may have to devote more resources to market analysis,
to determine appropriate price and non-price terms and conditions
(although the expected reduction in dispute-handling should offset
this).

5
Consultation

These two options for
reform of Part XIC were included in the discussion paper
‘National Broadband Network: Regulatory Reform for
21 st Century Broadband’. 140 submissions were
received during the consultation, many from industry
stakeholders.

Of the submissions
which commented on the operation of Part XIC, the vast majority
supported reforming the access regime (access seekers were
particularly strong on this point), and there was broad agreement
with the direction laid out in Option B. Most submissions endorsed
the general use of ex ante determination of price and
non-price terms, the elimination of the negotiate-arbitrate model
and the curtailment of appeals processes.

While Telstra
supported some of the measures put forward (such as greater
streamlining of regulation) it did not endorse either option.
Foxtel and News Ltd opposed Option B.

The ACCC submission
suggested combining the two options and applying different
approaches to different market segments, depending on the degree of
vertical integration present. Some declared services would remain
under the negotiate-arbitrate model, while others would be
regulated in accordance with Option B. However, this would
substantially increase the complexity of access regulation without
a clear benefit.

Detailed
summary of submissions

Submitters were
overwhelmingly of the opinion that the negotiate-arbitrate model
has not worked; however opinions varied about whether and to what
extent it should have a continuing role. Unwired and the Seven
Network considered that the streamlined process for setting access
terms should only apply to vertically integrated providers. Some
parties said the ACCC should have the option to choose between a
streamlined, up-front price-setting process and the
negotiate-arbitrate model. There appeared to be a consensus that
any terms of access not determined under the streamlined process
should be left to negotiate-arbitrate.

Some submitters,
including Hutchison and Macquarie, suggested time limits should
apply to the process and there was also support for giving the ACCC
flexibility to specify terms of access for a long duration in order
to afford greater certainty (for instance TransACT).

A number of parties,
including the ACCC, Telstra and Optus, argued that the value of the
regulatory asset base be determined up-front and apply to future
relevant regulatory decisions, without the need for constant
revaluation (perhaps, subject to standard variations for capital
and depreciation).

AAPT objected to the
ACCC being given the ability to determine different terms of access
for different access providers and/or access seekers, arguing that
the same terms of access should have to apply across the board.

All submitters who
addressed the issue were in favour of letting access providers and
access seekers agree different terms of access than those
determined by the ACCC. However, AAPT and Macquarie said that
any alternative terms agreed by the parties should require the
ACCC’s approval, or should be subject to the ACCC’s
veto (respectively). In addition, AAPT said that the access price
agreed by the parties should not be allowed to differ from the
access price determined by the ACCC by more than 3% to 5% (up or
down) to prevent big volume discounts being given to big players
only. The Competitive Carriers’ Coalition (CCC) said that the
parties should only be allowed to agree a lower access price than
that determined by the ACCC if the lower price reflected
identifiable and quantifiable economies for the access
provider.

In general,
submitters did not propose significant changes to the process for
declaring services. Vodafone, however, submitted that only services
that are supplied by operators with significant market power should
be susceptible to declaration.

Optus, Macquarie and
AAPT wished to see exemptions abolished, believing that they
undermine declarations and create uncertainty.

There was also
significant support for abolishing undertakings; this was advocated
by Optus, Macquarie, Vodafone, AAPT and the CCC. Telstra expressly
supported the proposal to enable the ACCC to request a party who
lodged an undertaking to vary it without being required to lodge a
fresh undertaking and re-start the process. Telstra also argued
that undertakings be deemed acceptable where they are consistent
with legislated pricing principles.

Optus, Macquarie,
Primus, TransACT and the CCC called for the abolition of merits
review of the ACCC’s decisions. The only major
telecommunications providers who expressly supported merits review
were Vodafone and Hutchison.

Telstra advocated
more limited changes to Part XIC than other telecommunications
providers, the main elements being: enable the ACCC to deal with
access disputes collectively; specify pricing principles in
legislation which the ACCC will be bound to apply; and appoint an
independent expert to review the ACCC’s and Telstra’s
cost models.

6.
Recommendation

Having examined the
available evidence, the Government agrees with the premise put
forward by many stakeholders that the current telecommunications
access regime is flawed. Given the sector’s increasingly
important role in Australia’s economy, this regulatory
failure needs to be addressed.

Based on feedback
received from its public consultation process, the Government is
persuaded that any reform undertaken must include the removal of
the negotiate-arbitrate model from the regime, in favour of more
direct ex ante price-setting by the regulator. This will
lead to greater certainty, less disputation and more timely and
efficient outcomes. It is also more broadly consistent with the
access regimes that operate in other key infrastructure industries
in Australia, such as gas and electricity, and the role of the
telecommunications regulator in other international jurisdictions.
Option B’s package of reforms is therefore the recommended
alternative, as on balance the benefits to be gained outweigh the
potential costs.

7.
Implementation & review of the preferred option

The Government will
introduce legislation to reform Part XIC of the Competition and
Consumer Act 2010 in accordance with the principles outlined
under Option B. This will include transitional arrangements for
existing declared services.

The ACCC will be
asked to analyse the current market and consult widely with
industry on the optimum terms and conditions to apply to each
declared service, in advance of any formal determinations being
made. Provisions for transitioning current contracts to the new
arrangements will be examined, with the most likely approach being
that transitional arrangements would provide for determinations to
be made on access disputes where the determinations would have
retrospective application or would apply to the date of an access
determination for the relevant service under the new framework.

A review will be
conducted three years after implementation to assess how the new
system is working.

REGULATION IMPACT
STATEMENT

REFORM OF PART XIB
OF THE COMPETITON AND CONSUMER ACT 2010 (COMPETITION
ARRANGEMENTS)

1. Issues which give rise to the need for action

Background

Part XIB of the Competition and
Consumer Act 2010 (the Act) sets out a
telecommunications-specific anti-competitive conduct
regime (and certain information gathering powers). Part XIB
prohibits a service provider with a substantial degree of market
power from engaging in conduct which has either the effect or
purpose of substantially lessening competition.

Telecommunications
carriers and carriage service providers are prohibited from
engaging in anti-competitive conduct, as defined by section 151AJ
of the Act. This is known as the competition rule (section 151AK).
If the ACCC believes a service provider is engaging in
anti-competitive conduct in a telecommunications market it
may issue a competition notice under Part XIB.

Proceedings for enforcing the competition
rule, other than proceedings for injunctive relief (that can be
instituted at any time), cannot be instituted unless the alleged
conduct is of a kind dealt with in a Part A competition notice that
was in force at the time the alleged conduct occurred. Before the
ACCC issues a Part A competition notice, it must give the provider
concerned a consultation notice which describes the alleged
anti-competitive conduct in summary form, and must give the
provider an opportunity to make submissions (s151AKA(9), (10)).

As an alternative to issuing a Part A
competition notice, the ACCC can issue a Part B competition notice.
A Part B competition notice sets out the particulars of the
contravention, which are prima facie evidence of the matters in any
proceedings under or arising out of alleged contraventions of the
competition rule. There is no requirement to issue a consultation
notice before issuing a Part B competition notice. (However,
the ACCC still has a duty under the general law to afford the
provider concerned procedural fairness before issuing a Part B
competition notice.)

There are some
important differences between Part A and Part B competition
notices. A Part A notice allows the ACCC to obtain pecuniary
penalties under s151BY of the Act and also allows for the recovery
of damages under s151CC. In contrast, the issuing of a Part B
notice does not allow the recovery of pecuniary penalties or
damages.

The recipient of a
competition notice can alter its behaviour to take account of the
competition notice or it may choose not to change its behaviour. A
decision to disregard a competition notice exposes a party to very
significant potential penalties, but those penalties would only
apply if a court found that the competition rule had been breached.
Importantly, as a competition notice does not of itself direct a
party to take action, there are no penalties for failing to comply
with a competition notice.

Thus, a party who
believes that a court would not find it in breach of the
competition rule might decide to continue its behaviour unchanged.
In practice, both scenarios have occurred, i.e. in some cases the
recipient of a competition notice has altered its behaviour, while
in one case the party continued its conduct unchanged.

The problem

Part A Competition
Notice

The Part A competition notice process has been
criticised on the grounds that the consultation process is open to
being manipulated. The statutory requirement
to consult with the intended recipient of a Part A competition
notice means the ACCC must take a number of steps prior to issuing
this form of competition notice. Specifically, the ACCC must ensure
it gives the intended recipient of a competition notice sufficient
time to make a submission and must then take that submission into
account prior to issuing a competition notice.

A competition notice can
be subject to legal challenge on the grounds that the prior
consultation notice did not afford sufficient procedural fairness.
The potential and incentive exist for the intended recipient of a
notice to draw out any consultation to avoid or delay the issue of
a Part A competition notice. Such a delay can lead to irreversible
damage to competitors that may be affected by any alleged
anti-competitive conduct.

For example, the ACCC
issued a consultation notice to Telstra in December 2005 with
respect to increases in the price of the wholesale line rental
service. In April 2006 the ACCC issued a Part A competition notice
against Telstra because it had reason to believe that
Telstra had engaged, and was engaging, in at least one
instance of anti-competitive conduct relating to Telstra's pricing
of its wholesale local services products.

Telstra challenged the
competition notice, arguing that the issues raised
by the ACCC in the competition notice differed from the issues
raised in the consultation notice and that, as a result,
Telstra had not been provided with procedural fairness . The Federal Court
agreed with Telstra and the competition notice was declared
invalid.

Application of Part XIB to content service
providers

Part XIB needs to
be responsive to technological changes that are occurring in the
industry. At present, it is not explicit that Part XIB applies to
‘content services’ supplied by carriers and carriage
service providers. Content services are
defined in section 15 of the Tel Act and in section 152AC of
the Act (within Part XIC) and include a broadcasting service,
online information service, online entertainment service, any other
online service, or any other service as determined by the
Minister.

Advances in technology have increased the
capacity for carriers and carriage service providers to provide
content services. Clarifying the scope of Part XIB is beneficial
for all parties, as it increases regulatory certainty and reduces
the risk of protracted legal disputes on this issue.

The offering of
bundled packages (often involving the supply of voice, internet and
television) is now commonplace. Bundled packages involving the
supply of content services by carriers and carriage service
providers may have anti-competitive consequences if a
provider’s market power can be leveraged to gain advantage in
the market for another service. For example, if a
vertically integrated carrier acquires premium content on an
exclusive basis this could be a source of significant market power
which could be used to stifle investment in new telecommunications
infrastructure. In these instances, if the ACCC believes the
relevant conduct breaches the competition rule it must be able to
take enforcement action without doubts over the application of Part
XIB to content services.

2. Objectives

Streamlining the competition notice process under Part
XIB

The first
objective is to develop a more streamlined process for competition
notices so that the ACCC can move quickly to issue a competition
notice as soon as it has reason to believe anti-competitive conduct
is occurring in the telecommunications industry.

Ensuring Part XIB applies to content
services

The second objective is to ensure that the
ACCC will be in a position to take swift enforcement action in
relation to instances of alleged anti-competitive conduct involving
content services.

C
enabling the ACCC to issue binding rules of conduct when issuing a
competition notice; and

D
enabling the ACCC to issue binding rules of conduct when it
suspects anti-competitive conduct.

Ensuring Part XIB applies to content
services

E
clarifying the scope of Part XIB.

Option A -
Removing consultation notice requirement

This option
involves removing any requirement for the ACCC to undertake
consultation before issuing a Part A competition notice. By
removing the requirement for the ACCC to undertake consultation
before issuing a Part A competition notice, the party alleged to
have taken part in anti-competitive conduct is denied the ability
to delay the ACCC’s enforcement activities on procedural
grounds. The focus for both parties will therefore be on resolving
the alleged illegal conduct, rather than on litigation aimed at
challenging the processes followed by the ACCC. If the ACCC
commences court proceedings to enforce a Part A competition notice,
the ACCC would still have to prove to the court that the
competition rule had been breached by the alleged offender.

In addition to removing the specific
requirement in s151AKA to issue a consultation notice, it is also
necessary to remove the requirement imposed on the ACCC under the
common law to provide procedural fairness when issuing a
competition notice. Otherwise, the policy objective of more timely
outcomes would be frustrated and the risk of a successful challenge
to the ACCC’s legal processes would remain. It may be noted
that procedural fairness arrangements have previously been removed
under s152CPA(3) of the telecommunications access regime. The
purpose of the amendment to s152CPA(3) was to allow the ACCC to
issue interim determinations quickly so as to avoid competitive
damage being incurred as a result of any delays on procedural
fairness grounds.

Removing the obligation to issue consultation
notices would not be inconsistent with procedural fairness
considerations more generally, because:

­
the ACCC will issue a competition notice that specifies the details
of the alleged anti-competitive conduct;

­
the ACCC would retain the power to revoke the competition notice if
parties can convince the ACCC that the notice was issued in error;
and

­
before penalties are applied, the ACCC has to prove to the court
that the anti-competitive conduct has occurred.

This option, which could be implemented separately or in
conjunction with Option A, requires the ACCC when issuing a
competition notice to provide guidance to the recipient on how to
rectify the anti-competitive conduct and have the competition
notice removed.

This option involves giving the ACCC the power
to impose binding rules of conduct when issuing a competition
notice. If the ACCC believed that anti-competitive conduct was
taking place, the ACCC could be empowered to issue binding rules of
conduct that would compel the recipient to change its conduct. The
binding rules of conduct would be forward-looking and would be
targeted at preventing future instances of particular
anti-competitive conduct. In practice, the ACCC would be able to
directly regulate the behaviour of a party or parties, including
behaviour relating to the supply of wholesale services.

A competition notice differs from binding rules of conduct, because
a competition notice does not direct any party to undertake or
refrain from any course of action. It must be enforced by the ACCC
in court before the alleged offender can be made to pay damages or
penalties.

Binding rules of conduct would provide the ACCC with the ability to
clearly specify the conduct that must be followed by a party that
has been issued a competition notice. This mechanism would provide
for timely outcomes and greater certainty for the parties involved
in a dispute.

This option
involves abolishing the competition notice regime and empowering
the ACCC to issue binding rules of conduct where it considers a
party is engaging in anti-competitive conduct. Unlike Option
C, the ACCC would not be required to issue a competition notice
before issuing binding rules of conduct. Therefore, the ACCC could
quickly issue binding rules of conduct to address conduct that it
believes to be detrimental to competition. Option D would also
remove the penalties which currently apply to breaches of the
competition rule.

Ensuring Part XIB applies to content
services

Option E - Clarifying the scope of Part
XIB

This option involves ensuring that the Part
XIB competition notice regime unequivocally applies to content
services delivered by carriers and carriage service providers.

4. Impact
assessment

This section discusses the costs and benefits
of the options put forward in terms of the impact on business, the
Government and consumers. It is not possible to precisely quantify
the costs and benefits for any party, though all of the options
would, to varying degrees, reduce any losses that might arise from
anti-competitive behaviour.

The proposed changes to Part XIB will affect
the ACCC and potentially any carrier or carriage service provider
that is providing telecommunications services. As the proposed
reforms aim to achieve greater efficiency under Part XIB, the
benefits of a less cumbersome regulatory framework will flow
through to consumers in the form of investment leading to better
quality services. This is because a market that operates free of
anti-competitive practices will achieve more efficient outcomes for
the end-users of telecommunications services. Anti-competitive
conduct damages the competitive process by potentially eliminating
or damaging smaller competitive players. Such damage to the
competitive environment will reduce the benefits to consumers that
stem from innovation and competitive pricing.

The options discussed
below will negatively impact on any access provider that may look
to engage in anti-competitive conduct in relation to the supply of
telecommunication services. It is believed that this outcome will
be of benefit to consumers, because anti-competitive conduct
detracts from the benefits that are attained through
well-functioning and competitive markets.

Option A - Removing consultation notice requirements for Part
A Competition Notices

Benefits:

·
The operation of a more streamlined competition notice process will
allow the ACCC to commence enforcement action under Part XIB in a
more timely manner.

·
Access seekers and access providers will benefit from the removal
of the ACCC’s obligation to issue a consultation notice
before it can issue a competition notice. This is because the swift
resolution of these disputes will allow for the affected parties to
have greater regulatory certainty and this allows for more
effective business planning.

·
In the past, the ACCC has stated that Part XIB regulatory processes
have taken over 18 months to resolve. For access seekers that are
waiting for the outcome of such processes, this uncertainty can be
very costly as some instances of competitive harm are irreparable.
Therefore, removing such uncertainty can provide some significant
benefits for the parties waiting for the dispute to be
resolved.

Costs:

·
The current consultation process allows for the recipient of a
consultation notice to alter its conduct, potentially removing the
need for a competition notice to be issued. When the consultation
notice regime works effectively, competition notices do not need to
be issued, as the party involved in the alleged illegal conduct can
reach an agreement with the ACCC to discontinue any further
action.

·
Currently a party that had been issued with a consultation notice
could make a submission to the ACCC to explain why a competition
notice should not be issued. This process can alleviate the need
for further action to be taken, if the recipient of the notice can
show its conduct is justifiable. Removal of this consultation
process may negatively impact on the recipients of competition
notices, as they will no longer be afforded the opportunity to
justify their conduct before being issued with a competition
notice.

·
If the recipient of a competition notice uses the guidance provided
by the ACCC to alter its conduct, then ACCC resources will be used
more efficiently and the anti-competitive conduct can be quickly
brought to an end.

Costs:

·
If the ACCC was to provide guidance when issuing a competition
notice, this could compromise the ACCC’s enforcement role,
either on that occasion or in future instances, i.e. where similar
circumstances apply and the conduct remains anti-competitive, but
had been modified to avoid the description in the ACCC
guidance.

·
The provision of guidance will also be a resource intensive process
for the ACCC and the costs imposed on the ACCC may not be
justifiable if the guidance provided does not result in the
recipient of the guidance altering its conduct.

·
This type of regulatory mechanism could facilitate timely
intervention by the ACCC to prevent or mitigate competitive
detriment flowing from the anti-competitive conduct. It would
provide for a more effective operation of the competition notice
regime.

·
This could also deter future instances of anti-competitive
conduct.

Costs:

·
This option would in effect allow the ACCC to regulate the supply
of wholesale services where competition issues have arisen,
regardless of whether these services have been declared under the
telecommunications access regime in Part XIC of the Act. The ACCC
would be able to instruct the relevant parties to engage in a
specific course of conduct. Regulation of non-declared services in
this manner may be considered to be over-reaching and could harm
investor confidence.

·
This would provide for a much simpler regime without competition
notice/consultation notice arrangements which have been criticised
for taking too long and being too cumbersome.

·
This would allow the ACCC to provide timely, practical responses to
potential competition issues without having to prove that the
competition rule has been breached. There should also be more
certainty on how matters could be resolved.

Costs:

·
As in Option C, this option would also allow the ACCC to in effect
regulate the supply of wholesale services, regardless of whether
these services have been declared under the telecommunications
access regime in Part XIC of the Act. Regulation of non-declared
services in this manner may be considered to be over-reaching and
could harm investor confidence.

·
If the ACCC was able to impose binding rules of conduct on the
basis of a reasonable belief that the conduct concerned is
anti-competitive conduct, without having to establish in court that
the conduct actually is anti-competitive conduct, the result would
be that binding rules of conduct could sometimes prevent conduct
which constitutes legitimate competition and which is not, in fact,
anti-competitive. This would be detrimental to competition and
efficiency. It would also be unfair to the provider
concerned, who would be prevented from being able to pursue its
legitimate commercial interests.

Option E - Clarifying the scope of Part
XIB

Benefits:

·
Amending Part XIB in order to confirm it applies to carriers and
carriage service providers providing content services would add
certainty to the scope of the anti-competitive conduct regime.

Costs:

·
As this provision would give more certainty by clarifying the
existing law, no costs have been identified. It is not believed
that any parties are benefiting or would seek to benefit from the
lack of clarity that currently exists. This amendment is being
proposed simply to clarify the scope of Part XIB.

5.
Consultation

Suggested reforms for Part XIB have been made
by a variety of stakeholders. Some of the suggestions that were
provided by stakeholders have been used to develop the reforms to
Part XIB. For example, the ACCC stated that “Removing the
statutory requirement to undertake consultation prior to issuance
of a competition notice would simplify the administrative
obligations on the ACCC and could enable it to respond more quickly
to anti-competitive conduct.” [101]

Optus has
also expressed concern about the drawn out nature of the
consultation process that currently operates under Part XIB.
Specifically, Optus has argued that “The time required for
the ACCC to receive submission(s) from Telstra in response to such
notices and consider them allows Telstra many further months in
which to continue engaging in anti-competitive conduct, thereby
damaging competition in the market.” [102]

Telstra
also supported the removal of consultation notices. [103]
Telstra also suggested in its submission that it believes the ACCC
should be required to give guidance on rectifying behaviour and be
required to proceed with legal action on a timely basis. [104]
Telstra does not support giving the ACCC power to make binding
rules of conduct. It believes this would slow down the issuing and
resolution of Competition Notices because of need for due
process. [105]

AAPT supported the removal of the consultation
notices and supported the introduction of ACCC powers relating to
binding rules of conduct when it is issuing a competition
notice. [106]
The Competitive Carriers Coalition also believes that the
consultation notice requirement should be revoked and the ACCC
should be given the ability to impose binding rules of conduct when
issuing a competition notice. [107]

6.
Recommendation

The requirement to
issue a consultation notice has resulted in legal challenges and
delays that have frustrated the efficacy of the Part A competition
notice process. The consultation notice was intended to provide the
recipient with certainty in relation to the allegation of
anti-competitive conduct. However, the consultation phase has
arguably provided the recipient with the ability to delay the issue
of a competition notice, whilst trying to maximise the advantage
accrued as a result of the relevant alleged anti-competitive
conduct.

Such delaying tactics
are contrary to the policy intention of Part XIB, which is aimed at
achieving the timely resolution of disputes regarding allegations
of anti-competitive conduct. It is therefore recommended that
Option A be implemented.

It is also recommended that Option E be
implemented. Clarifying the scope of Part XIB to include content
services will be beneficial for all relevant parties, as it
increases regulatory certainty and reduces the risk of protracted
legal disputes on this issue.

It is recommended that Option B not be
implemented, as the costs of this reform are likely to outweigh the
benefits. The resource costs imposed on the ACCC are likely to be
significant and it is unclear whether the guidance provided by the
ACCC will lead to the swift resolution of a dispute. As discussed
earlier, it is also believed that Option B could compromise the
ACCC’s enforcement role.

The proposed reforms to Part XIB are being made in conjunction with
reforms to Part XIC. One of the proposed reforms for Part XIC will
provide the ACCC with the power to issue binding rules of conduct
to address competition issues relating to the supply of declared
services under that Part. It is expected that the ACCC will be able
to use that power to effectively resolve some competition issues
that may otherwise require the ACCC having to issue a competition
notice under Part XIB. Therefore, including a power to issue
binding rules of conduct within Part XIB may amount to the creation
of superfluous regulation.

It is recommended that Options C and D are not
implemented. Binding rules of conduct are best introduced into Part
XIC, because this would ensure binding rules of conduct are only
issued in relation to declared services. This outcome is
preferable, because it ensures that any binding rules of conduct
that may be issued by the ACCC are clearly linked to benefiting the
long-term interests of end users.

Furthermore, the removal of the consultation
notice requirement (as proposed by Option A) will lessen the need
for binding rules of conduct to be used under Part XIB. This is
because it is believed that removal of the consultation notice
requirement will lead to the more timely resolution of disputes
under Part XIB.

7.
Implementation and review of the preferred option

The implementation of Option A and Option E
will require amendments to the Act.

Transitional arrangements will not be
required. If at the time in which the proposed amendments become
law the ACCC has issued a consultation notice, it is intended that
the consultation notice would cease to have effect and the ACCC
will be able to utilise the streamlined process proposed in Option
A.

REGULATION IMPACT
STATEMENT

TELECOMMUNICATIONS CONSUMER
SAFEGUARDS

On 20 June 2010, the Australian
Government announced that it would progress public policy reforms
to support the transition to the National Broadband Network (NBN).
The reforms include establishing a new entity, USO Co, which will
commence operations in July 2012 and will, over time, become the
entity with the regulated responsibility for delivering the
government’s public policy objectives in the
telecommunications sector.

This Regulation Impact Statement
focuses on arrangements to improve the existing consumer safeguard
framework in the transition to the NBN and establishment and
operation of USO Co.

1. Issues which give rise to the
need for action

Changing customer
needs

The Universal Service
Obligation was set out in the Telecommunications Act 1975 as
a requirement on the then Telecom:

‘to
perform its functions in such a manner as will best meet the
social, industrial and commercial needs of the Australian people
for telecommunications services and shall, as far as it is, in its
opinion, reasonably practical to do so, to make its
telecommunications services available throughout Australia for all
people who reasonably require those services…[and] to have
regard to the special needs for telecommunications services of
Australian people who live or work outside the
cities.’

The concept
has its genesis in the development of the telephone network to
provide a ubiquitous service throughout the nation. Prior to the
establishment of competition in the 1991 legislation, Telecom and
its predecessors financed the development of the network in rural
and remote areas. With the advent of competition it was believed
that this policy might become unsustainable as competition in urban
areas made the incumbent telephone company uncompetitive compared
to providers that did not need to incur the expense of extending
the network into remote areas. It was assumed that extending the
telephone network to remote areas meant supplying services in these
areas at a commercial loss.

To deal with this perceived problem the
Telecommunications Act 1991 : (a) enshrined the obligation on
the incumbent, Telstra, to maintain services across Australia; and
(b) provided for the incumbent, Telstra, to be compensated. Thus
the concept of the USO and the supply of a standard telephone
service at a loss was introduced, at least as far as funding was
concerned. The Telecommunications Act 1991 also provided
that all carriers contribute to the compensation paid to the USO
provider.

Currently the USO arrangements have the
objective of making access to basic voice telephony services and
payphones available across the nation on a reasonable and equitable
basis (s.8A of the Telecommunications (Consumer Protection and
Service Standards) Act 1999 .

The USO is implemented by a legislative
requirement that Telstra ‘take all reasonable steps to
fulfil’ the obligation, and to the extent necessary, supply
services to people on request (ss.12C & 9(2) of the
Telecommunications (Consumer Protection and Service Standards)
Act 1999 ).

In addition to the USO, where a
provider offers a basic telephone service, the Customer Service
Guarantee (CSG) provides standards for the time to connect new
services, repair faults and keep appointments. Where the
standard is not met, the provider must pay the customer financial
compensation. The CSG does allow providers to supply a service
without the CSG applying in some circumstances and there are
exemptions from the CSG where providers offer temporary services or
are unable to meet repair times due to circumstances beyond their
control.

The Australian Communications and Media
Authority (ACMA) has found, in its various consumer reports, that
over recent years overall compliance with the CSG has been falling,
particularly repair times for payphones in remote areas [108] .

The retail price controls imposed on
Telstra under Part 9 of the Telecommunications (Consumer
Protection and Service Standards) Act 1999 require Telstra to
offer a basic voice telephony service at the same price in
non-metropolitan areas as it offers in metropolitan areas. Due to
its USO obligation, this raises the issues as to whether Telstra
provided services in certain areas of Australia at prices below the
cost of provision.

While traditional fixed-line voice
services remain important, people can now purchase a range of
standard mobile and satellite services across the nation from
commercial suppliers operating outside the USO regime. These
services are available wherever a person resides or works. They
generally provide voice telephony services and often broadband
services. The price and charges for some of these services may be
higher than the charges applying to the standard voice service
supplied by Telstra. However, given the take-up of mobile services
it is clear that they are generally affordable.

Further, in many areas Voice Over the
Internet Protocol (VOIP) services - voice telephony supplied
using a broadband or bitstream connection - are available.
Excluding the charges for the broadband connection, these services
generally provide substantially cheaper voice telephony than the
standard voice telephony service provided by Telstra under the
USO.

The cost of the
USO

The arrangements providing for Telstra
to be compensated for its USO obligation involve a levy imposed on
all carriers that is proportional to their annual revenue. The
total levy is paid as a subsidy to Telstra. No arrangements are in
place for the benefits accruing to Telstra from being the USO
provider to be taken into account.

The levy arrangements do, to a certain
extent, distort the market, by leading to inefficient prices. The
levy arrangements increase the cost to providers in supplying
services, which is likely to be passed on to customers in higher
prices. Given the sensitivity of telecommunications demand to price
changes and the importance of telecommunications as an input to
economic and business activity, the economic efficiency cost of the
levy is likely to be significant. In addition, to some extent
the levy acts as a barrier to market entry. Although there are
provisions for other USO providers to date, no provider has been
approved by ACMA as a competing universal service provider. There
are no suppliers, other than Telstra, of fixed cable or fixed
wireless terrestrial telephony services in many rural and remote
areas.

The problem of
measuring USO costs

Determination of the USO subsidy amount
has always been a matter of dispute. Telstra consistently claims
that the cost to it in fulfilling the USO is much higher than the
subsidy. A financial cost model developed by the former Australian
Communications Authority for the 1997-98 subsidy estimated the USO
cost at $548 million per annum.

Other
industry participants claim that the current subsidy level set by
the Minister at $145 million for 2007-08 is too high. They claim
that Telstra gains significant benefits from being the USO provider
which at least match the USO cost. These benefits include the
marketing advantages of a national presence and status as the USO
provider and other benefits such as advertising on payphones. A
1999/2000 study commissioned by the Australian Communications
Authority estimated these benefits to be between $36 and $73
million per annum [109] .
This argument has led to numerous calls over many years for Telstra
to meet the full cost of the USO.

Estimating the true
cost of the USO subsidy is problematic. Equally difficult would be
the task of estimating the number of individuals or businesses who
might be disadvantaged by the absence of the USO. For the years
from 1992-93 to 1997-98, when a cost model was used to estimate USO
costs, the number of loss making customers was estimated at around
400 000 [110] .
However, many of these consumers would still have purchased a
standard telephone service even if the full cost of provision were
charged.

Other countries, such as the United
States and Canada have USO subsidy arrangements. However, in some
countries the incumbent telecommunications operator is required to
meet a universal service standard but it is not compensated for
doing so. The universal service provider does not receive funding
in the United Kingdom, Singapore, the Netherlands, Finland or
Germany. While the United Kingdom, Singapore and the Netherlands
are small, high population density countries, Finland and Germany
have substantial rural populations.

Need to upgrade
the universal service regime

While the USO covers only standard
telephony services and payphones there have been calls for
universal service arrangements to apply to digital or bitstream
communications access since the late 1990s. The 2008 Regional
Telecommunications Independent Review Committee recommended that
new universal service arrangements should apply to mobile telephony
and broadband. Many submitters to the discussion paper National
Broadband Network: Regulatory Reform for 21st Century Broadband
(the discussion paper) called for universal arrangements to be
extended to broadband.

The Regional Telecommunications
Independent Review Committee took the view that mobile and
broadband services have become as significant and important to
Australians as fixed line voice telephony [111] .
The Committee noted that broadband has become an essential service
in households across Australia and that in wide areas of Australia
access to terrestrial broadband services and satellite broadband
services are more expensive and of a lower standard than services
available in metropolitan areas.

The Regional Telecommunications Independent Review
Committee was not in favour of bringing new services specifically
under the USO. Instead the Committee recommended a new universal
service regime that would involve:

· reference
standards for services which customers should be able to
access across the
country (the Committee referred to these standards as the
Communications Service Standards);

· Government
intervention such as targeted funding programs to ensure services
that meet the reference standards are available in areas where the
market does not supply them; and,

· arrangements
making the Minister transparently accountable to Parliament for the
effectiveness of Government interventions in ensuring services
meeting the reference standards are available [112] .

The Regional Telecommunications
Independent Review Committee proposal, if implemented, would
indicate where there are service adequacy gaps which the market
could fill. Failing that, the Government might address these
service gaps through programs such as the Australian Broadband
Guarantee or through regulation.

The Australian
Government has established NBN Co to roll-out infrastructure that
will support voice and high speed broadband services covering all
Australian premises, which will provide access to the network
on a wholesale-only basis, allowing providers to focus on serving
their customers across the network. The rollout of the NBN will
result in a fundamental change to the structure of the Australian
telecommunications market.

In recognition of the
fundamental changes to the sector, the Government is developing a
new institutional, regulatory and funding framework for the
delivery of the Universal Service Obligation and other public
interest services in an NBN environment. The details for these
arrangements and decisions about further regulatory changes to
apply in the longer term will be announced following public
consultation.

Maintaining a
satisfactory voice telephony USO

The impact of the USO and the retail
price controls means there is little incentive on the (USO
provider) Telstra, to improve service delivery to consumers,
including the provision of payphones. This has resulted in
criticism of the USO arrangements particularly from Telstra’s
competitors, but also from consumers who argue they have limited
choice of provider and are not satisfied with the quality of
service received.

Successive governments have regulated
Telstra’s behaviour, particularly requiring Telstra to supply
services in fulfilment of the USO and where there is limited
competition. Examples of such regulation include:

· the Customer
Service Guarantee (CSG) which imposes requirements on service
providers to supply new service connections and fix faults within
specified periods of time and to keep appointments or pay the
customer specified financial damages;

· Priority
Assistance which requires Telstra to provide enhanced services to
people with life threatening medical conditions;

· the Network
Reliability Framework which requires Telstra to report to the ACMA
on performance of its network, and to fix poorly performing local
areas and individual services; and

· the Local
Presence Plan which requires Telstra to maintain local presence in
regional areas.

Past practice
has sought to minimise the negative impact on the industry of these
legislative requirements by providing substantial flexibility
within the regulations. The ACMA is responsible for administering
the legislative requirements and is required under section 4 of the
Telecommunications Act 1997 (the Act) to regulate
telecommunications in a manner that:

a) promotes the greatest practicable use of
industry self-regulation; and

b) does not impose undue financial and
administrative burdens on participants in the Australian
telecommunications industry, but does not compromise the
effectiveness of regulation in achieving the objects of the Act,
such as the object of providing a regulatory framework that
promotes the long-term interests of end-users.

The USO requires Telstra to only take
‘reasonable steps’ to fulfil the Obligation. The
details on what services will be supplied and in what circumstances
are set out in Part 2 of the Telecommunications (Consumer
Protection and Service Standards) Act 1999 and in
Telstra’s Universal Service Obligation Standard Marketing
Plan.

The Standard Marketing Plan and policy
are prepared by Telstra and approved by the ACMA. It is largely up
to Telstra to decide what is ‘reasonable’. Controls on
Telstra have been criticised as being ineffective. For example,
there have been numerous calls to improve the provisions relating
to the consultation with local communities before payphones are
removed. These concerns may have been heightened in view of the
decline in the number of payphones in recent years (see Figure
1).

Figure 1: Number of
payphones in Australia

(Source: ACMA , Communications
Report 2007-08 )

The Customer Service Guarantee

The CSG provides for carriage service
providers to pay customers compensation for each working day that
connections or fault rectifications are delayed beyond the maximum
CSG timeframes, or if they fail to keep an appointment. Currently
there is no other consequence if there is widespread non-compliance
with the CSG timeframes. The Regional Telecommunications
Independent Review Committee noted that communities felt carriers
were inappropriately using CSG waiver provisions to avoid their CSG
responsibilities [113] .
In addition there is evidence that some service providers have
increased their overall damages payments to consumers which would
indicate a preference to pay the damages rather than fix the
service for the consumer [114] .
Many of Telstra’s competitors argue that they have difficulty
with the CSG requirements because they rely on Telstra’s
network and Telstra to repair faults and make new
connections.

Despite the interventions, service
quality monitoring by the ACMA indicates that service quality
measures have been trending downwards in recent years. For example,
overall compliance by Telstra with CSG provisions has been steadily
falling (see Figure 2).

Providers are also increasingly
avoiding the CSG in many areas by offering customers alternative
services on the condition that the customer agrees to waive rights
to the CSG. Examples include Telstra’s wireless local loop
service, Virgin, TransACT, and various VOIP based services. Figure 2: Telstra's quarterly
fault repair performance

Three options have been identified
concerning the scope of universal service arrangements during the
interim period while the NBN is being rolled out.

SCOPE OF UNIVERSAL
SERVICE

The three options identified for
interim (pre NBN) universal service arrangements
include:

A. expand the scope of universal
service arrangements along the lines suggested by the Regional
Telecommunications Independent Review Committee;

B.
retain the current scope of the arrangements but tighten regulation
to ensure existing safeguards are effective in the transition to
the NBN and development of USO Co; and

C. no change to existing
arrangements.

Option A - Expand the scope of
universal service regime along the lines suggested by the Regional
Telecommunications Independent Review Committee

A modified version of the Regional
Telecommunications Independent Review Committee proposal for
Communications Service Standards would be developed. This
would involve amending the Telecommunications (Consumer
Protection and Service Standards) Act 1999 to enable the
Minister to establish Communications Service Standards in respect
of voice telephony, mobile voice telephony, payphones and
broadband.

Prior to the rollout of the NBN, any
communications service standard developed by the Minister would be
limited to broadband and mobile services and should not increase
Government demand for safety net programs such as the Australian
Broadband Guarantee and the Satellite Phone Subsidy
Scheme . The objective would be to ensure there was no reduction
in services available under the current arrangements and to
minimise unnecessary costs due to investments in infrastructure
supporting broadband supply which would be obsolete with the
NBN.

Legislative arrangements would also be
made to provide that the current USO arrangements for standard
telephony (including mobile and broadband services) would cease in
areas declared by the Minister. This would be confined to areas
where competition was strong and a range of services were being
provided to consumers or where alternative arrangements are in
place with services available from the NBN. It would enable the
obligation on Telstra to be gradually wound back in the transition
to the NBN.

This option would largely address the
problems raised by the Regional Telecommunications Independent
Review Committee concerning the lack of access by many rural and
remote customers to broadband services.

Option B - Retain the current scope of the arrangements but
tighten regulation to ensure existing safeguards are effective in
the transition to the NBN and development of USO Co

This option involves measures to better protect
consumers in the transition to the roll out of the NBN, including
by:

· replacing
current unenforceable arrangements which require Telstra to only
take reasonable steps to fulfil the USO with a legislated
requirement for Telstra to supply specified services when requested
by customers and make available public payphones;

· enabling the
Minister to determine in enforceable subordinate instruments the
specific characteristics, terms and conditions of the services to
be supplied in fulfilment of the USO including connection and
repair periods, the reliability of services, payphone placement
criteria and performance benchmarks;

· providing for
failure by the universal service provider to meet performance
benchmarks or service specifications or criteria to be a
contravention of a civil penalty provision, subject to a
fine;

· enabling ACMA
to review Telstra decisions on the supply of USO services including
removing payphones;

· introducing
new timeframes for connections and repairs on Telstra where a
non-Telstra provider supplying a CSG service relies on Telstra to
make the connection or repair the service;

· clarifying
the operation of provisions allowing providers to contract out of
the CSG to ensure that the provider may only do so with the
customer’s express agreement;

· broadening
the ACMA’s record keeping powers to allow it to obtain
regular reports about carriers’ and service providers’
compliance with their obligations;

· enabling the
Minister to direct the ACMA to determine an industry standard to
enable a more effective regulatory response where industry codes do
not adequately deal with consumer issues;

· enabling the
ACMA to issue infringement notices; and

· retaining the
Priority Assistance requirement on Telstra and requiring providers
to either offer a Priority Assistance service or inform customers
of providers from whom the customer can purchase a priority
assistance service if they require it.

This option would strengthen the USO
requirements to ensure no Australians are worse off in the
transition to the NBN environment and largely address the growing
problem of falling compliance with the CSG and prevent any further
decline in compliance.

Option C - No change to existing
arrangements

Under this option no regulatory changes
would be proposed at this stage but major regulatory change would
be required in the post NBN environment. The issue of universal
access would then be addressed in the context of the
Government’s announcement that it is establishing a wholly
Government-owned entity - USO Co - to take responsibility for
future delivery of the Universal Service Obligation and other
public interest obligations. USO Co is expected to operate from 1
July 2012 and its functions will include the provision of funding
for the delivery of the USO for voice telephony services and
payphones.

4. Impact assessment

Option A - Expand the scope of
the universal service regime along the lines suggested by the
Regional Telecommunications Independent Review
Committee

Benefits:

This option would help address the gap
between rural and urban take-up of broadband services. Australian
Bureau of Statistics data shows that the gap in broadband take up
between very remote areas and the major cities is between 10 and 20
per cent of households [115] .

The Regional Telecommunications
Independent Review Committee has commented on the large benefits of
broadband services to people in rural and remote areas although it
was unable to quantify these. There have been a large number of
studies recently, in Australia and elsewhere, demonstrating very
large benefits from broadband services both for consumers and
business [116] .
Thus there are likely to be significant economic benefits as well
as equity benefits.

In summary, the main beneficiaries of Option A
are:

· Consumers,
particularly in rural areas, would have an increased assurance of
ongoing availability of broadband services;

· Telstra who
would be able to be released from some legislative requirements
where competition is established;

· Telstra’s
competitors who would have a greater chance of competing in rural
and remote areas, particularly by supplying mobile and broadband
services in competition against Telstra’s fixed network.
Non-Telstra providers would also have greater opportunities to
receive subsidies for programs such as the Australian Broadband
Guarantee if the scope of services being subsidised were
widened.

Costs:

Any
broadening of universal service arrangements or government funding
programs to provide further broadband services in rural and remote
areas is likely to be very costly. For example, subsidies payable
under the current Australian Broadband Guarantee (ABG)
program are up to $6000 per customer over three years and this is
for a minimal broadband service. It is unclear how many USO
customers there are, but in the past the number has been as high as
400 000. Using the lower figure would produce a one off cost
estimate of more than $400 million per year. In addition, some of
the costs of Telstra’s existing network would remain even if
customers switched to ABG funded broadband services. In fact,
Telstra’s USO costs could increase significantly as revenues
are likely to fall more if Telstra has to keep its network going
for those customers that remain on its network.

Of more concern,
however, is that any increased investment in broadband services
prior to the rollout of the NBN would become obsolete. The
Government has announced a higher standard of services of at least
12 Mbps for the households outside the fibre network fibre to the
premise footprint of the NBN.

Option B - Retain the current
scope of the arrangements but tighten regulation to ensure existing
safeguards are effective in the transition to the
NBN.

Benefits:

There is a strong level of concern
about the quality of telephony services, particularly in rural and
remote areas. The findings of successive reviews of
telecommunications services in regional areas have highlighted this
issue. Further, the ACMA has drawn attention to the decline in
standards of service in recent years and the limitations on its
enforcement powers to address concerns.

All carriers, including Telstra, are
required to meet CSG requirements including connection times and
timeframes for repairing faults. For example, Telstra failed to
meet the ACMA standard of 90 per cent of faults repaired within CSG
timeframes in the December 2007, and the June and September
quarters of 2008 [117] .
In 2006, Telstra took longer than the CSG requirements to repair
more 60 000 faults and paid out over $5 million in CSG compensation
payments to customers. The Telecommunications Industry Ombudsman
has also noted a large increase in industry complaints in
2007-08 [118] .

Option B will strengthen the USO and
CSG arrangements and signals the Government’s intention to
ensure high quality telecommunications services are provided in
regional and rural Australia.

While no statistics are collected of
Telstra’s refusal to provide a service on grounds that it was
unreasonable, the Regional Telecommunications Independent Review
Committee has reported that the ACMA finds enforcement problematic.
It also notes that Telstra retains the right to make the final
decision on providing a payphone service. The Committee noted the
concerns expressed in submissions about lack of adequate
consultation and the need for improvement.

This option would also address these
community concerns. Firstly, it will clarify the obligations for
both Telstra and customers. Secondly, it will provide the
opportunity for a review by the ACMA of the process for
Telstra’s decisions on new connections and payphone
locations, particularly where a decision to remove a payphone is
disputed.

By including the standards in the
Telecommunications (Consumer Protection and Service Standards)
Act 1999 and specifying penalties there should be a marked
increase in compliance. By increasing civil penalties in some
cases, carriers will be more likely to comply with the obligations
rather than pay compensation. Under this proposal, by setting out
clearly the standards of service required customers would be given
a clearer understanding of their legitimate expectations on service
quality and providers would also be given greater
certainty.

The inclusion of additional
record-keeping powers is consistent with current ACMA regulatory
enforcement powers and is necessary to provide the regulator with
sufficient means to oversee carriers in terms of meeting their
service obligations. Similarly, empowering the Minister to direct
the ACMA to determine an industry standard (thus making it
mandatory) will enable a more effective regulatory response where a
currently-unenforceable voluntary industry code has not resulted in
consumers receiving an acceptable level of service.

Importantly, option B does not exclude
the implementation of Option A at a future date.

Costs:

While Option
B would provide more protection to customers, it should be
acknowledged this option does involve continued investment in, and
maintenance of, assets that are likely to be superseded by the
rollout of the NBN. The cost of maintaining the ageing copper
network could exceed the costs to customers of additional faults.
For example, the costs could greatly exceed the current CSG
compensation payments of around $5 million. While some assets, like
copper cables and ducts, have a long economic life, other assets
such as electronic equipment, switching equipment and IT assets,
have shorter lives and so need to be replaced more
frequently.

Option B would require
Telstra, Optus and other carriers to maintain compliance to meet
the benchmarks for consumer safeguards on a national basis.
However, Telstra’s compliance with remote fault repair times
would need to increase from around 86 per cent to 90 per cent
(December 2008
[119] ). Based upon the December
2008 figures, compliance with new connection times will have to be
brought up, as only Optus was the only carrier that met the ACMA
informal benchmark CSG standard of more than the 90 per cent.
Telstra (88 per cent) and AAPT (82 per cent) did not meet the
informal benchmark.

There would be additional
resource costs for both the ACMA and the carriers, because they
would have to devote more resources to ensuring compliance. In
addition, civil penalties may add to the current compensation fees
of $5 million unless carriers change their behaviour.

Telstra has been in
discussions with the Department about compliance and reporting
obligations over the past few years. The main cost increases for
Telstra will be potential civil penalties if Telstra does not meet
compliance benchmarks and the costs of maintaining the copper
network which will be progressively overbuilt by the NBN. It is not
possible to quantify these costs, and they will depend on the
degree to which the new regulations will require services to be
delivered at standards higher than those currently achieved. A
further RIS will be prepared for the legislation to implement these
arrangements, which will better address these costs, after the
detailed regulatory changes have been determined.

Carriers
already maintain records to allow the ACMA to assess performance
compliance and the additional record-keeping requirements represent only
a marginal increase in regulatory burden. Carriers will only
experience an additional burden if the ACMA invokes the use of the
proposed increase in record-keeping powers.

If the ACMA is directed by
the Minister to determine an industry code, any possible regulatory
effects will be considered during the preparation of a regulatory
impact statement and in following the consultation requirements of
the Legislative Instruments Act 2003 .

Option C - No change to existing
arrangements

Benefits:

There are few benefits to this Option.
Consumers will not be protected by strengthened safeguards, which
are proposed in Option B.

Costs:

Option C
risks a fall in service quality for customers covered by the USO
using Telstra’s voice telephony and payphones. Telstra may
seek to minimise maintenance costs of the copper as the NBN is
rolled out. This may impact badly on customer services. The current
arrangements may not effectively prevent this.

5. Consultation

In April 2009 the Government called for
submissions on its National Broadband Network: Regulatory Reform
for 21st Century Broadband discussion paper. The issues covered
in this RIS formed Chapter 4 of that discussion paper. All the
options except some elements of Option B are raised
there.

The discussion paper elicited over 130
submissions from a wide range of industry carriers, consumer
groups, State and local government bodies and
individuals.

The main views expressed in the
submissions were:

Scope of Universal
Service

Most of the industry support the USO
continuing in the interim but consider that changes will be
necessary after the NBN rollout. Industry stakeholders noted
that:

· the NBN could
take responsibility for the USO;

· the USO could
be shared between NBN Co and Telstra;

· new
arrangements could be established such as government
funding;

· The USO could
be reduced to a safety net.

Telstra opposes any extension of the
obligation - rather it supports reducing regulations
associated with the USO. Some carriers supported the Communications
Service Standard approach but others see the USO being gradually
phased out as the NBN is rolled out (Competitive Carriers
Coalition) or restricted to providing a safety net
(Hutchison).

There was fairly widespread support
among consumer groups for the Communications Service Standard
approach as well as from some State Governments. The ACCC argued
that the Communications Service Standard could be a tool for
reducing the regulatory burden in the area of consumer safeguards,
by removing unnecessary regulation and/or streamlining regulatory
requirements such as the Network Reliability Framework and the
Customer Service Guarantee.

The Communications, Electrical and
Plumbing Union, however, opposed this approach noting the cost and
likelihood of insufficient funding. However, it also believed the
NBN had overtaken the concept of the Communications Service
Standard and is concerned that the Communications Service Standard
might not provide the current level of certainty to consumers, at
least for those services now included in the USO. The
Communications Alliance supports research on the appropriateness of
consumer protections before the obligation is broadened.

Consumer
groups generally favour the Communications Service Standard. The
Australian Telecommunications Users Group favoured both a voice and
a broadband guarantee.

Customer Service Guarantee

Telstra and Australian
Telecommunications Users Group supported strengthening the CSG with
significant penalties. The Tasmanian Government opposed it.
TransACT supports the CSG being the sole regulatory
safeguard.

Consumer groups supported introducing
CSG performance benchmarks. This proposal was also supported by
Telstra. Other providers tended to oppose introducing CSG
performance benchmarks. In many cases they do not have control over
repairs to services because currently Telstra is the underlying
carrier. The proposal to require Telstra to meet CSG timeframes for
services provided at a wholesale level to other providers should
address this concern.

Option B was not mentioned in the
discussion paper and so was not commented on. However, this option
is consistent with the main argument of the submission to retain
the current arrangements in the lead-up to the NBN. The proposal to
tighten the USO and CSG arrangements is a reasonable response to
the potential risk of Telstra running down its network.

The ACMA, which will implement the
measures in Option B, has been consulted. It is in favour of the
measures in Option B although would seek additional funding to
match the additional administrative work involved. It also supports
Option D.

6. Recommendation

Scope of Universal
Service

Option B is recommended because it is
critical to protect consumers as the NBN is progressively rolled
out and new universal service arrangements can be
developed.

The changes proposed should provide
more certainty to consumers and greater clarity of their rights
because they will be less reliant on Telstra’s decisions as
to what it deems is reasonable. Consumers should also gain more
confidence in that they can seek a review by the ACMA of
Telstra’s USO decisions that adversely affect them. It is
acknowledged that this option will impose some extra costs on
carriers, particularly Telstra, in ensuring compliance with USO and
CSG requirements. It is also not possible to quantify the impacts
on customers of the benefits of greater carrier compliance nor the
costs on the USO provider.

The main reason Option A is not
recommended is because of the potential large increase in cost. The
costs could be in excess of $1 billion while the benefits are
uncertain. There is also a large risk that network upgrades could
become obsolete with the rollout of the NBN and this would result
in considerable costs due to wasted investment.

The costs of Option B
are likely to be much smaller than those of Option A, or negligible
if Telstra alters its behaviour. Possible civil penalties may add
to the current compensation payments of $5 million or
alternatively, there will be costs to Telstra of bringing
compliance up to standard to avoid civil penalties. In total these
costs should be of an order of magnitude less than those of Option
A and the costs will be offset by increases in benefits to
consumers.

Option C was not
supported as it would allow service quality to continue to fall.
Further it would expose consumers to further declines in service
quality should Telstra allow service quality to decline as the NBN
is rolled out. Should this occur, consumers would face considerable
costs due to an inability to get a new service connected, or an
existing service repaired, in a reasonable timeframe.

7. Implementation and review of the
preferred option

The proposed legislative changes are
designed to apply for the interim period while the NBN is being
rolled out. The legislative arrangements for tightening consumer
protection measures will be implemented immediately.

The ACMA will be required to administer
the changes proposed in Options B. As noted above, Option B will
entail some resourcing issues for the ACMA. The ACMA has estimated
the cost at about $1.5 million per year.

Future USO arrangements will be
considered in the context of the Government’s decision
to establish USO Co.

Minister:
Minister for Broadband, Communications, and the Digital Economy

NTN Sale
Act:
National Transmission Network Sale Act 1998

Radcom
Act
Radiocommunications Act 1992

Tel
Act:
Telecommunications Act 1997

Tribunal:
Australian Competition Tribunal

USO:
Universal service obligation

VOIP:
Voice over Internet Protocol

NOTES ON CLAUSES

Clause 1 - Short title

Clause 1 provides that the Bill, when
enacted, may be cited as the Telecommunications Legislation
Amendment (Competition and Consumer Safeguards) Act 2010 .

Clause 2 - Commencement

Clause 2 of the Bill provides for the
commencement of the Bill.

Clauses 1-3 of the Bill and any other
provisions not covered in the table provided at subclause 2(1),
would commence on the day on which the Bill receives the Royal
Assent.

Parts 5A, 8 and 9 of Schedule 1 will commence
on the day after the Bill receives the Royal Assent.

Parts 2, 3 and 7 of Schedule 1, and Division 1
of Part 1 of Schedule 1, will commence at the start of the day
after the Bill receives the Royal Assent, or immediately after the
commencement of item 2 of Schedule 5 to the Trade Practices
Amendment (Australian Consumer Law) Act (No. 2) 2010 , whichever
occurs later in time. The reason for this is that provisions
in those Parts of the Bill refer to the CCA, rather than the name
by which that Act is known at the time of the Bill’s
introduction: the Trade Practices Act 1974 . From 1
January 2011 the short title of the Trade Practices Act 1974
will change to the Competition and Consumer Act 2010 as a
result of the Trade Practices Amendment (Australian Consumer
Law) Act (No. 2) 2010 . The commencement provisions for
these parts of the Bill ensure that the references in the Bill to
the CCA will be effective in making amendments to that Act, by
deferring their commencement until the change of name of that Act
takes effect.

Parts 4 and 6 of Schedule 1 to the Bill will
each commence on the day after the end of the period of 3 months
beginning on the day on which the Bill receives the Royal
Assent.

Part 5 of Schedule 1 to the Bill will commence
on the day after the end of the period of 6 months beginning on the
day on which the Bill receives the Royal Assent.

Delaying the commencement of these Parts will
afford service providers with a period of time to change their
operations where necessary to comply with the amendments. Further,
in the case where legislative instruments need to be made, the
delay will provide time for those instruments to be drafted and, in
reliance on section 4 of the AIA, to be made in advance of the
amendments made by those Parts to the Tel Act and the Consumer
Protection Act.

Division 2 of Part 1 of Schedule 1 to the Bill
would commence immediately after a functional separation
undertaking comes into force under proposed Part 9 of Schedule 1 to
the Tel Act (see item 31 of Schedule 1). That Division makes
changes to the Tel Act and the CCA that are necessary as a
consequence of the commencement of a functional separation
undertaking. The Minister is required to announce, by notice
published in the Gazette, when a final functional separation
undertaking comes into force.

Division 2 of Part 1 of Schedule 1 to the Bill
would commence immediately after an undertaking comes into force
under proposed section 577A of the Tel Act (see item 30 of
Schedule 1). That Division makes changes to the Tel Act and
the CCA that are necessary as a consequence of the commencement of
an undertaking under proposed section 577A. The Minister is
required to announce, by notice published in the Gazette, when such
an undertaking comes into force.

Clause 3
- Schedule(s)

Clause 3 provides that each Act that is
specified in a Schedule to the Bill is amended or repealed as set
out in that Schedule and any other item in a Schedule has effect
according to its terms. There is one Schedule to the Bill which
amends the Tel Act, the CCA, the Consumer Protection Act, and the
NTN Sale Act.

As noted above, provisions in the Bill refer
to the CCA, rather than the name by which that Act is known at the
time of the Bill’s introduction: the Trade Practices Act
1974 . A note at clause 3 observes that from 1 January
2011 the short title of the Trade Practices Act 1974 will
change to the Competition and Consumer Act 2010 as a result
of the Trade Practices Amendment (Australian Consumer Law) Act
(No. 2) 2010 .

As a result of section 10 of the AIA, a
reference to the CCA in the Bill will include a reference to that
Act before its name was changed, ie. before 1 January 2011.
This is explained further in the explanatory notes for Division 2
of Part 2 of the Bill, which contains transitional provisions
dealing with arrangements existing under Part XIC of the then
Trade Practices Act 1974 before the commencement of that
Part of the Bill or before the introduction into Parliament of the
2009 Bill.

Schedule
1—Amendments

Part
1—Amendments relating to Telstra

Part 1 of Schedule 1 to the Bill makes a
number of amendments to the Radcom Act, the Tel Act, and the CCA to
address the current structure of the telecommunications
sector.

Division 1—Amendments commencing on
the day after this Act receives the Royal Assent

Subsection 58(1) deals with spectrum licence
allocation by the ACMA following conversion of an apparatus licence
into a spectrum licence.

Proposed subsection 58(1A) makes it clear that
spectrum licence allocation pursuant to subsection 58(1) of the
Radcom Act is subject to the provisions in proposed
section 577J of the Tel Act. Proposed section 577J
limits the allocation of certain spectrum licences to Telstra and
is discussed under item 30 below.

Section 60 deals with procedures for spectrum
licence allocation by the ACMA.

Proposed subsection 60(15) makes it clear that
any spectrum licence allocation procedures determined by the ACMA
under section 60 would be subject to the provisions in proposed
section 577J of the Tel Act.

Section 68 authorises third party use of a
spectrum licence subject to conditions specified under that
section.

Proposed subsection 68(5) makes it clear that
third party use of a spectrum licence under section 68 is subject
to the provisions in proposed section 577K of the Tel Act.
Proposed section 577K puts limits on the use of certain spectrum
licences by Telstra and is discussed under item 30 below.

Item 5 - Subsection 85(1)

Section 85 of the Radcom Act deals with
trading of spectrum licences.

Item 5 amends subsection 85(1) to make the
assignment or dealing with spectrum licences subject to proposed
section 577L of the Tel Act. Proposed section 577L limits the
assignment of certain spectrum licences to Telstra and is discussed
under item 30 below.

Telecommunications Act
1997

Item 6
- Section 7

Item 6 inserts a proposed definition of
‘designated part of the spectrum’ in section 7 of the
Tel Act referring to proposed section 577H of the Tel Act.
This definition is discussed below under the explanatory note for
proposed section 577H under item 30.

Item 7
- Section 7

Item 7 inserts a proposed definition of
‘draft functional separation undertaking’ in section 7
of the Tel Act by reference to proposed Division 2 of Part 9 of
Schedule 1. Proposed Division 2 of Part 9 of Schedule 1
includes provisions dealing with the contents of a draft final
functional separation undertaking, the provisions it must contain,
and the principles with which it must comply.

Item 8 inserts a proposed definition of
‘draft migration plan’ in section 7 of the Tel Act,
which refers to the provisions inserted into that Act by the Bill
that set out the meaning of that term (see item 30).

Item 9 - Section 7

Item 9 inserts a proposed definition of
‘final functional separation undertaking’ in section 7
of the Tel Act by reference to proposed Division 2 of Part 9 of
Schedule 1. Proposed Division 2 of Part 9 of Schedule 1
includes provisions dealing with the contents of a final functional
separation undertaking, the provisions it must contain and the
principles with which it must comply.

Item 10
- Section 7

Item 10 inserts a proposed definition of
‘final migration plan’ in section 7 of the Tel Act,
which refers to the provisions inserted into that Act by the Bill
that set out the meaning of that term (see item 30).

Item 11
- Section 7

Item 11 inserts a proposed definition of
‘hybrid fibre-coaxial network’ under section 7 of the
Tel Act. This new definition underpins the proposed
amendments to be made to the Tel Act by Part 1 of Schedule 1 of the
Bill which enable the ACCC to accept an undertaking by Telstra in
relation to control of hybrid fibre-coaxial networks.
The proposed definition is not restricted to Telstra’s
current hybrid fibre-coaxial network, but could also apply to any
such network Telstra builds in future or hybrid fibre-coaxial
networks owned by other parties.

Items 13 to 15 insert proposed definitions of
‘radiocommunications device’, ‘spectrum’,
and ‘spectrum licence’ in section 7 of the Tel Act,
adopting the same meaning for those terms as they have in the
Radcom Act.

Item 16 inserts a proposed definition of
‘subscription television broadcasting licence’ in
section 7 of the Tel Act, adopting the same meaning for that term
as it has in the BSA.

Item 17 - After subsection
69(5)

Item 17 makes a change to section 69 to
prevent the ACMA giving Telstra a remedial direction about
compliance with a licence condition relating to a voluntary
undertaking under proposed Part 33 of the Tel Act. It is not
appropriate for the ACMA to have the power to enforce
Telstra’s compliance with voluntary undertakings, which are
regulated by the ACCC under the telecommunications regulatory
framework.

Item 18 - Before subsection
69(7)

Subsection 69(1) of the Tel Act and its
related provisions under section 69 authorise the ACMA to issue a
remedial direction to a carrier that is contravening, or has
contravened, a condition of its carrier licence.

Item 18 amends section 69 by inserting
proposed subsection 69(6B).

Proposed subsection 69(6B) prevents current
subsection 69(1) from applying to the condition set out in proposed
clause 84 of Schedule 1 to the Tel Act (which deals with control by
Telstra of certain spectrum licences).

The effect of proposed subsection 69(6B) is
that the ACMA would not be authorised to issue a remedial direction
to Telstra in the event it contravened proposed clause 84 of
Schedule 1 to the Tel Act. The reason for this restriction is that
it is intended that only the ACCC (and the Minister, where
appropriate) will have authority to take action against Telstra for
breach of proposed clause 84 of Schedule 1 to the Tel Act.
The condition in proposed clause 84 of Schedule 1 to the Tel Act is
associated with amendments proposed under Part 1 of Schedule 1 of
the Bill to address Telstra’s level of dominance in
telecommunications markets and the negative impact this has had on
the development of effective competition in the telecommunications
industry. It is therefore a matter for which it is
appropriate the ACCC be given regulatory
responsibility.

Item 19
- After subsection 70(2)

Item 20
- After paragraph 70(5)(a)

Section 70 of the Tel Act provides that the
ACMA may issue a formal warning to a carrier if the carrier
contravenes a condition of the carrier’s licence—except
for particular specified conditions, for which the ACCC may issue a
formal warning.

Items 19 and 20 would amend section 70 with
the effect that the ACCC, but not the ACMA, may issue a formal
warning if Telstra contravenes conditions of its carrier licence
which provide that Telstra must comply with any voluntary
undertakings under proposed Part 33 of the Tel Act that are in
force. The ACCC is exclusively given this power because the
undertakings relate to competition issues which are regulated by
the ACCC under the telecommunications regulatory framework.

Item 21
- Before subsection 70(4)

Subsection 70(1) of the Tel Act authorises the
ACMA to issue formal warnings to carriers that have contravened a
condition of their carrier licence.

Item 21 amends section 70 by inserting
proposed subsection 70(3B).

Proposed subsection 70(3B) indicates that
current subsection 70(1) does not apply to the condition set out in
clause 84 of Schedule 1 of the Tel Act. The effect of
proposed subsection 70(3B) is that the ACMA would not be
authorised to issue a formal warning to Telstra in the event it
contravened proposed clause 84 of Schedule 1 of the Tel Act.
The reason for this restriction is the same as that outlined under
the explanatory note under item 18 above.

Item 22
- After paragraph 564(3)(a)

Item 23
- Subsection 564(3) (after note 1)

Section 564 of the Tel Act provides that the
Federal Court may grant injunctions relating to contraventions of
the Tel Act. Applications for injunctions may be made by the
Minister, the ACCC and, except in relation to certain specified
contraventions (which generally relate to competition issues), the
ACMA. Item 20 makes a change to section 564 to provide that
the ACMA may not seek injunctions in relation to a contravention by
Telstra of the conditions of its carrier licence which provide that
Telstra must comply with any voluntary undertakings under proposed
Part 33 of the Tel Act that are in force. It is appropriate
to restrict the ACMA from taking action in relation to any
contravention by Telstra of these licence conditions as the
undertakings relate to competition issues which are regulated by
the ACCC under the telecommunications regulatory
framework.

Under current subsection 564(3) the ACMA is
not entitled to apply for an injunction in relation to a
contravention of a carrier licence condition or service provider
rule listed under that subsection.

Proposed paragraph 564(3)(ba) adds the licence
condition under proposed clause 84 of Schedule 1 to the Tel Act to
the list of licence conditions and service provider rules in
subsection 564(3). This means that the ACMA would not be
entitled to apply for an injunction in relation to a contravention
of clause 84 of Schedule 1 to the Tel Act. The reason for
this restriction is the same as that outlined in the explanatory
note under item 18 above.

Item 25 adds a proposed note to section 564 in
relation to proposed paragraph 564(3)(ba) to assist the
reader.

Item 26 - After paragraph
571(3)(a)

Item 27 - Subsection 571(3) (after
note 1)

Section 570 of the Tel Act provides that the
Federal Court may order a person to pay a pecuniary penalty if the
person contravenes a civil penalty provision (which is a term
defined in section 6 of the Act, see the amendment made by item 251
of the Bill).

Section 571 provides that proceedings for the
recovery of a pecuniary penalty may be instituted by the Minister,
the ACCC and, except in relation to certain specified
contraventions (which generally relate to competition issues), the
ACMA.

The effect of proposed paragraph 571(3)(aa)
(inserted by item 26) is that the ACMA may not institute
proceedings for the recovery of a pecuniary penalty in relation to
a contravention by Telstra of the conditions of its carrier licence
which provide that Telstra must comply with any voluntary
undertakings under proposed Part 33 of the Tel Act that are in
force. The reason for this is as described in relation to
items 19 and 20 above.

Item 27 adds a note to subsection 571(3) in
relation to proposed paragraph 571(3)(aa) to assist the
reader.

Under current subsection 571(3) the ACMA is
not entitled to institute a proceeding for recovery of a pecuniary
penalty in relation to a contravention of a carrier licence
condition or service provider rule listed under that
subsection.

Proposed paragraph 571(3)(ba) adds the licence
condition in proposed clause 84 of Schedule 1 to the Tel Act to the
list of licence conditions and service provider rules in
subsection 571(3). This means that the ACMA would not be
entitled to institute a proceeding for recovery of a pecuniary
penalty in relation to a contravention of the carrier licence
condition in proposed clause 84 of Schedule 1 to the Tel Act.
The reason for this restriction is the same as that outlined in the
explanatory note under item 18 above.

The provisions under Part 33 are intended to
address the level of Telstra’s vertical and horizontal
integration. Telstra’s high-level of integration has hindered
the development of effective competition in the Australian
telecommunications market. The Government intends to correct this
unique market structure, by introducing a set of measures designed
to promote competition across the various telecommunications
platforms while providing Telstra with the flexibility to choose
its future path.

Under proposed Part 33, the Minister will be
able to make a legislative instrument (here called a
‘spectrum determination’) that will prevent Telstra
from acquiring specified bands of spectrum, which could be used for
advanced wireless broadband services. However, the
legislative instrument would only operate in certain limited
circumstances: if Telstra provides undertakings that are accepted
by the ACCC, to structurally separate, divest its hybrid
fibre-coaxial cable network and divest its interests in Foxtel,
then any spectrum determination will be of no effect, and the
provisions of proposed Part 33 will not operate to prevent Telstra
from acquiring spectrum.

If the Minister is satisfied that a structural
separation undertaking given by Telstra is sufficient to address
concerns about the degree of Telstra’s power in
telecommunications markets, the Minister may remove either or both
of the requirements for Telstra to divest its hybrid fibre-coaxial
cable network and divest its interests in Foxtel.

Proposed Division
1—Introduction

Proposed
section 577 Simplified outline

Proposed section 577 provides a simplified
outline of proposed Part 33 to assist the reader.

Proposed subsection 577A(1) allows the ACCC to
accept a written undertaking given by Telstra regarding structural
separation. Structural separation is regarded, under proposed
paragraph 577A(1)(a), as Telstra, at all times after the designated
day, ceasing to supply fixed-line carriage services to retail
customers in Australia using a telecommunications network over
which Telstra is in a position to exercise control.

Additionally, structural separation requires
Telstra to ensure that a company over which Telstra is in a
position to exercise control will not supply fixed-line carriage
services to retail customers in Australia using such a
telecommunications network after the designated day.

The term, ‘designated day’ is
defined in proposed subsection 577A(4) (which is explained below),
and the term ‘fixed-line carriage services’ is defined
in proposed subsection 577A(14): a ‘fixed-line carriage
service’ means a carriage service supplied using a line to
premises occupied or used by an end-user, or a service that
facilitates the supply of such a carriage service (eg. an
infrastructure-based service that is not of itself a carriage
service).

The meaning of ‘control’ and
‘control of a company’ for the purposes of proposed
Part 33 is addressed in proposed sections 577N and 577P
respectively.

Under
proposed paragraph 577A(1)(b), Telstra is required, under a
structural separation undertaking, to set out specified action it
will take and/or refrain from taking in connection with the
structural separation undertaking. It is intended that
Telstra would set out, in any structural separation undertaking
purported to be given under section 577A, the action it will take
or refrain from taking, in order to achieve structural separation
as described under paragraph 577A(1)(a). This may involve a series
of steps in the lead up to full structural separation and
milestones and timeframes for achieving each of those steps.

There are a number of ways in which Telstra
might propose to undertake structural separation under proposed
subsection 577A(1). A few examples are:

Telstra may elect to facilitate the transfer
of the provision of fixed-line carriage services to its retail
customers to another carriage service provider, over which Telstra
is not in a position to exercise control.

Telstra may establish a new company to supply
fixed-line carriage services to its retail customers and divest
enough of its interests in that company to ensure that it is
no longer in a position to exercise control of that company.

Telstra may elect to progressively migrate
the traffic of its retail customers to another national network for
the provision of fixed-line carriage services, such network being a
network over which Telstra is not in a position to exercise
control

Proposed subsection 577A(3) is included to put
beyond doubt that a structural separation undertaking given to the
ACCC by Telstra must not only provide for Telstra to structurally
separate by the designated day, but must also provide for
appropriate and effective interim arrangements to apply between
Telstra’s business units in the period between the
undertaking coming into force and the designated day.

When a structural separation undertaking comes
into force, the operational separation regime currently applying to
Telstra will cease to operate (see Divisions 2 and 3 of Part 1 of
Schedule 1 to the Bill). Telstra will need to put in place,
through the mechanism of its structural separation undertaking,
appropriate interim arrangements to apply from that time until the
point at which Telstra achieves full structural separation, to
ensure that there is equivalence in supply of regulated services to
Telstra’s wholesale customers and Telstra’s retail
business unit during this interim period.

Proposed subsection 577A(2) clarifies that a
matter relating to these interim equivalence arrangements is taken
to be a matter in connection with proposed paragraph
577A(1)(a)—this is to put beyond doubt that such matters can
be included in a structural separation undertaking in accordance
with proposed paragraph 577A(1)(b).

Certain terms used in describing the interim
equivalence requirements in proposed subsections 577A(2) and (3)
are given the same meaning that they have in Part 9 of Schedule 1
(which deals with functional separation) (proposed
subsection 577A(4)).

It will be necessary for the ACCC to have
ongoing oversight of Telstra’s implementation of its
structural separation undertaking, both in the lead-up to, and
after, the designated day. For this reason, proposed
subsection 577A(5) imposes a requirement that the ACCC must not
accept a structural separation undertaking submitted by Telstra
unless the ACCC is satisfied that the undertaking provides
appropriate and effective means for the ACCC to monitor
Telstra’s compliance with the undertaking, and for Telstra to
put in place systems that promote the ACCC’s monitoring
role.

Proposed subsection 577A(6) sets out the
matters to which the ACCC must have regard when deciding whether to
accept a structural separation undertaking. Under proposed
paragraph 577A(6)(a), the Minister can set out matters that the
ACCC must have regard to in deciding whether to accept a structural
separation undertaking. As a result of proposed subsections
577A(8) and (9), the Minister is required to make an instrument
specifying matters for this purpose: see below. Proposed
paragraph 577A(6)(b) requires the ACCC to also have regard to
such other matters that it considers relevant.

Proposed subsections 577A(8) and (9) would
provide that Telstra may not give an undertaking to the ACCC under
proposed subsection 577A(1) unless the Minister has made an
instrument under proposed subsection 577A(7) setting out matters
that the ACCC must consider when deciding whether to accept the
undertaking, and that the Minister must take all reasonable steps
to ensure such an instrument comes into force as soon as possible
after proposed section 577A commences.

These provisions will avoid the possibility
that Telstra may give a structural separation undertaking to the
ACCC before the Minister has made an instrument setting out matters
that the ACCC must take into account in considering whether to
accept the undertaking. The provisions will ensure that the
ACCC is given appropriate guidance as to matters it should take
into account when considering an undertaking, as well as ensuring
that Telstra is able to consider the guidance given by the Minister
to the ACCC when preparing its draft undertaking.

Proposed new subsection 577A(10) defines the
term ‘designated day’ (used in proposed
paragraphs 577A(1)(a) and (577A(2)(d)). The ‘designated
day’ is 1 July 2018, or another day specified by the
Minister in a non-legislative instrument under proposed
paragraph 577A(10)(b). Proposed subsection 577A(11)
provides limitations on the Minister’s power to vary and
revoke an instrument specifying the designated day. Proposed
subsection 577A(12) provides that, where a structural separation
undertaking has been accepted by the ACCC, the Minister may not
make an instrument under proposed paragraph 577A(10)(b) specifying
a designated day that is earlier than the day that was the
designated day at the time that the structural separation
undertaking was accepted by the ACCC.

These provisions clarify that the
Minister’s power to specify a day is to be exercised from
time to time, including after Telstra has lodged a structural
separation undertaking, and even after the ACCC has accepted such
an undertaking, or after such an undertaking has entered into
force. This is to deal with the potential situation in which
a section 577A undertaking provides for Telstra to be structurally
separated by a particular date, with that date having been settled
on the basis of a particular timeframe for steps involved in the
process of achieving structural separation. If those steps
are then delayed for any reason, and Telstra is not in a position
to achieve full structural separation by that date, the Minister
needs to be able to extend the date specified in the undertaking
should it be appropriate to do so.

The Minister may not vary the instrument
specifying the day. The Minister may only revoke that
instrument if a new instrument is made, and the new instrument
specifies a later date. Moreover, after the ACCC has accepted
a structural separation undertaking given by Telstra, from that
point the Minister may only specify a day that is later than the
day that is the designated day at the time the undertaking is
accepted by the ACCC. This means, for example, that if the
ACCC accepts a structural separation undertaking given by Telstra
before the Minister exercises his or her power to make a
legislative instrument specifying a designated day (in which case
the designated day will be 1 July 2018 - see proposed
paragraph 577A(10)(a)), then the Minister will only thereafter be
able to make an instrument specifying a day that is later than
1 July 2018.

These provisions are aimed at ensuring that,
once the undertaking is accepted on the basis of a particular day
being the designated day, Telstra has the certainty of knowing that
it will not be required to achieve structural separation on an
earlier date - the date for achieving full structural
separation may be altered, but only to a later date.

An instrument under proposed paragraph
577A(10)(b) specifying a day as the designated day is not a
legislative instrument (proposed subsection 577A(13)). The
effect of such an instrument is to set another day as the
designated day for the purposes of proposed subsection
577A(1). This is a substantive exemption from
the LIA. The reason for exempting this type of instrument
from the LIA is that any exercise of the power will be to the
benefit of Telstra and providing for Parliamentary disallowance
would introduce a further level of uncertainty for Telstra
shareholders in deciding whether to accept a structural separation
undertaking. An instrument made by the Minister under
proposed paragraph 577A(10)(b) must be published on the
Department’s website (proposed subsection 577A(12)).

Proposed subsection 577A(13) establishes that
Telstra may request the Minister to extend the date for achieving
full structural separation. If Telstra gives the Minister
such a request, then the Minister must consider it, unless the
Minister considers that the request is frivolous or vexatious or
was not made in good faith (proposed subsections 577A(14) and
(15)). These provisions are intended to ensure that, if
Telstra considers that it will not be in a position to achieve full
structural separation by the designated day, then it can request
that the Minister extend the designated day. It is expected
that in making such a request Telstra would outline the reasons
that it considers it is necessary to extend the designated day, so
that the Minister could form a view as to whether it is appropriate
to do so.

While the Minister will ordinarily be required
to consider requests made by Telstra to extend the designated day,
this requirement does not apply in the case of a request that is
frivolous or not made in good faith. For example, in a
situation in which the Minister considers and refuses a request
made to the Minister by Telstra to extend the day, and then is
given a new request to extend the day immediately or very shortly
after having decided to refuse the initial request, the Minister
may be satisfied that the second request is frivolous or not made
in good faith (depending on the wider circumstances in which it is
made). If so, then the Minister would not be required to
consider the request.

Proposed subsection 577A(16) indicates that
the undertaking given to the ACCC by Telstra must be expressed to
be an undertaking under proposed section 577A, so that when the
ACCC receives the undertaking there can be no doubt as to whether
the undertaking was intended to be given in accordance with
proposed section 577A.

Proposed subsection 577A(17) provides
that the undertaking may not be withdrawn after it has been
accepted by the ACCC. This provision is aimed at ensuring
that careful consideration has been given to the matters proposed
in the undertaking before it is given, in the knowledge that if the
undertaking is accepted by the ACCC, the undertaking will become
final. This has the effect that Telstra could withdraw a
structural separation undertaking it has given to the ACCC up to
the point the ACCC accepts the undertaking. If it is clear
that the ACCC has concerns about an undertaking Telstra has given
it, Telstra will be able to withdraw and amend the undertaking, and
resubmit the amended undertaking to the ACCC for its
consideration

Given that the matters proposed under the
undertaking are likely to have a significant impact on the
telecommunications industry and the acceptance of the undertaking
by the ACCC would have the effect of triggering the operation of a
number of provisions proposed under the Bill there is a need for
certainty and therefore a need for the undertaking to be final
(note: the undertaking can be varied to a limited
degree - see proposed section 577B). For this
reason, this provision has the effect that Telstra cannot withdraw
the undertaking once it has been accepted.

Under proposed subsection 577A(18), an
undertaking may provide for the ACCC to perform functions or to
exercise powers in relation to the undertaking. This is
intended to permit the structural separation arrangements to
operate flexibly, by ensuring that the undertaking can provide for
the ACCC to make decisions on particular matters at a future
point. For example, a structural separation undertaking could
provide for the ACCC’s independent verification that
Telstra’s relevant information technology systems and
relevant processes are ‘customer agnostic’ and process
Telstra’s wholesale customers’ requests for relevant
services, or access to relevant services, on an equivalent basis to
services requested by Telstra’s retail business units.

Proposed subsection 577A(19) confirms that
Part 9 of Schedule 1 to the Tel Act does not, by implication, limit
the matters that may be included in an undertaking under proposed
section 577A. Part 9 of Schedule 1 to the Tel Act deals with
the functional separation of Telstra, which is a different
separation model to the model of structural separation referred to
under proposed section 577A. However, there should be no
implication that any model proposed under an undertaking provided
in accordance with proposed subsection 577A(1) cannot include
similar matters to those set out in Part 9 of Schedule 1 to the Tel
Act.

The term ‘associated provision’ is
defined in proposed subsection 577A(24). The effect of the
reference to the associated provisions at proposed subsections
577A(20) and (21) is to make it clear that certain other provisions
of the Tel Act and the CCA apply to the fixed-line carriage
services and telecommunications networks that are required to be
the subject of a structural separation undertaking under proposed
subsection 577A(1), and not to other fixed-line carriage services
or telecommunications networks that have been exempted from such an
undertaking by virtue of an instrument made by the Minister.

The associated provisions to which exemptions
will also apply are:

-
proposed subsection 577BA(11) of the Tel Act (which relates to a
migration provision in a contract between Telstra and an NBN
corporation); and

-
proposed subsection 577BC(2) of the Tel Act (which relates to the
matters that must be addressed by a draft or final migration
plan).

Proposed
section 577AA Acceptance of undertaking about
structural separation may be subject to the occurrence of
events

Proposed section 577AA provides that the
ACCC’s decision to accept an undertaking under proposed
subsection 577A(1) may be expressed to be subject to the occurrence
of one or more specified events within a specified period after the
undertaking is accepted.

An event may only be specified under proposed
subsection 577AA(1) if Telstra has nominated that particular event
in a document accompanying the undertaking given to the ACCC under
proposed section 577A.

Proposed paragraph 577AA(1)(c) lists the
categories which a nominated event must fall under in order to be
specified under proposed subsection 577A(1). The types of
events listed at proposed subparagraphs 577AA(1)(c)(i)-(v)
anticipate that a structural separation undertaking submitted by
Telstra may involve particular types of approvals under the
Corporations Act 2001 or under the Listing Rules of the
Australian Securities Exchange. Proposed paragraph
577AA(1)(c)(vi) permits Telstra to submit a structural separation
undertaking to the ACCC on condition that the undertaking will only
take effect if the ACCC approves a draft migration plan provided by
Telstra. Further explanation about the concept of a migration
plan and the way in which this condition would operate, if
specified by Telstra, is provided below in the discussion of the
migration plan provisions (proposed sections 577BB-577BF).
Proposed subparagraphs 577AA(1)(vii) and (viii) recognise that
Telstra may submit to the ACCC a structural separation undertaking
which will only take effect in the event that the Minister decides
to grant Telstra an exemption from the requirement to lodge
undertakings about hybrid fibre-coaxial networks and subscription
television broadcasting licences. The final category,
specified in proposed subparagraph 577AA(1)(c)(ix), allows an
event to be specified by a Ministerial instrument in force under
proposed subsection 577AA(3).

If Telstra nominates one or more of the listed
events in a document accompanying an undertaking that it gives to
the ACCC under proposed section 577A, then the ACCC may either:

-
accept the undertaking, subject to the occurrence of that event, or
those events, within a specified period after the undertaking is
accepted; or

-
reject the undertaking.

In that circumstance, it is not open to the
ACCC to accept the undertaking without making its acceptance
subject to the occurrence of the event, or the events, nominated by
Telstra. This will provide Telstra with some certainty about
the circumstances in which it will be required to implement
structural separation according to its undertaking.

Proposed subsection 577AA(2) provides that a
nomination under subsection 577AA(1) must not specify an event
by reference to the timing of the event. In accordance with
proposed subsection 577AA(1), it will be for the ACCC to specify
the period within which the event must occur - subject to the
requirement that the period must be six months, or if another
period is specified by the Minister in writing, that period
(proposed subsection 577AA(5)).

Proposed subsection 577AA(3) allows the
Minister to specify events, in writing, for the purposes of
proposed subparagraph 577AA(1)(c)(ix). This will allow some
flexibility, should it become apparent that Telstra wishes to
nominate additional types of events, while maintaining appropriate
scrutiny of the events that may be nominated.

An instrument made by the Minister under
proposed subsection 577AA(3) or (5) is not a legislative instrument
(proposed subsection 577AA(10)). It is not appropriate that
these instruments should be legislative instruments because Telstra
will need clarity around the arrangements before Telstra proceeds
with any subsequent steps, such as putting a resolution to
shareholders. The Minister must cause a copy of an instrument
made under either provision to be published on the
Department’s website (proposed subsection 577AA(9)).

Where the ACCC’s decision to accept a
structural separation undertaking is expressed to be subject to the
occurrence of an event or more than one event within a specified
time, proposed subsection 577AA(6) places a requirement on
Telstra to notify the ACCC in writing of the occurrence of each
event as soon as practicable after the occurrence of that
event. (This requirement does not apply to the acceptance by
the ACCC of a migration plan, if such an event is specified.)
This will ensure the ACCC is made aware of when a structural
separation undertaking comes into force (see proposed section
577AB).

Proposed subsection 577AA(7) provides that, if
the ACCC’s decision to accept a structural separation
undertaking is expressed to be subject to the occurrence of an
event within a specified time, and that event does not occur within
that time, then the Tel Act (other than subclause 76(4) of Schedule
1) has effect as if the undertaking had never been accepted by the
ACCC. This provision ensures that there are no unintended
consequences stemming from the ACCC’s acceptance of a
structural separation undertaking, in the circumstance where that
undertaking never comes into force. The reference to
subclause 76(4) of Schedule 1 to the Tel Act is included because
that subclause permits the Minister to extend the period within
which Telstra must give the Minister a functional separation
undertaking, and does so by reference to matters including whether
Telstra has given the ACCC an undertaking under proposed section
577A, and whether the ACCC has accepted the undertaking.

Proposed subsection 577AA(8) is similar to
proposed subsection 577AA(7), and deals with circumstances where
the ACCC’s decision to accept a structural separation is
expressed to be subject to the occurrence of more than one event
within a specified time, and at least one of those events does not
occur within that time.

Proposed section 577AB sets out rules for
determining when an undertaking under proposed subsection 577A(1)
comes into force, depending upon whether acceptance of that
undertaking is expressed to be subject to a single event occurring
(proposed paragraph 577AB(a)), two or more events occurring
simultaneously (proposed paragraph 577AB(b)), two or more events
occurring at different times (proposed paragraph 577AB(c)), or it
is not subject to any events occurring (proposed
paragraph 577AB(d)).

Proposed section 577AC provides that if a
decision is made by the ACCC to accept an undertaking about
structural separation under proposed section 577A, and that
decision is expressed to be subject to one or more specified events
occurring, the ACCC must:

(a)
as soon as practicable after the decision has been made, publish
the undertaking and terms of the decision on the ACCC’s
website; and

(b)
publish on its website a notice that the undertaking has come into
force, as soon as practicable after the ACCC has become aware of
this.

Where the decision is not expressed to be
subject to one or more specified events occurring, the ACCCC is
required as soon as practicable after accepting the undertaking, to
publish it on the ACCC website.

Proposed section 577B contains provisions
setting out the circumstances under which a structural separation
undertaking in force under proposed section 577A could be
varied.

Proposed subsection 577B(1) provides that
proposed section 577B only applies if an undertaking is in force
under proposed section 577A. One effect of this is that
Telstra may not seek to vary a structural separation undertaking
between the period when the ACCC accepts the undertaking and it
comes into force (ie. before the events specified by Telstra under
proposed section 577AA all occur).

Proposed subsection 577B(2) allows Telstra to
give the ACCC a variation of the undertaking in so far as the
undertaking is covered by proposed paragraph 577A(1)(b), and
does not consist of provisions of a migration plan (see proposed
sections 577BB-577BF). Provisions of an in-force migration
plan are treated as though they were provisions of the structural
separation undertaking: proposed subsection 577BE(5). There
is a specific mechanism for variations of the provision of a
migration plan: see proposed section 577BF. This means
Telstra is permitted to propose variations as to the action it will
take or refrain from taking in order to comply with structural
separation.

Given that the undertaking may require Telstra
to take action, or refrain from taking action, under proposed
paragraph 577A(1)(b) over the course of several years, it is
appropriate that a mechanism be included to vary the nature of the
obligations applying to Telstra during that period if necessary to
do so. However, Telstra is not permitted to propose variations that
alter the character of the undertaking as described by reference to
proposed paragraph 577A(1)(a).

Proposed subsection 577B(3) provides that
after considering the variation, the ACCC must either accept or
reject the variation, having regard to the matters
(if any) set out in an instrument in force under proposed
subsection 577B(5) (proposed paragraph 577B(4)(a)) and such other
matters (if any) the ACCC considers relevant (proposed paragraph
577B(4)(b)).

The object of proposed subsection 577BA
is to promote the
national interest in structural reform of the telecommunications
industry by authorising, for the purposes of subsection 51(1) of
the CCA (formerly the Trade Practices Act 1974 ), certain
conduct engaged in by Telstra, NBN corporations, and other relevant
persons.

Section 51 of the CCA provides that, in
determining whether a person has contravened Part IV of the CCA,
certain matters must be disregarded, including anything specified
in, and specifically authorised by, an Act. Proposed
section 577BA specifies and specifically authorises certain
conduct for the purposes of section 51 of the CCA. The result
of this is that the conduct specifically authorised under proposed
section 577BA must be disregarded when considering whether a person
who has engaged in that conduct has contravened Part IV of the
CCA.

The
conduct that is authorised is described in detail in proposed
subsections 577BA(2)-(10).

The conduct in question is also carved out
from the operation of Part XIB of the CCA (which provides a
specific anti-competitive conduct regime for the telecommunications
industry). As a result of the inclusion of proposed
subsection 151AJ(9) of the CCA by item 33 in Schedule 1 to the
Bill, a person who engages in conduct that is authorised for the
purposes of subsection 51(1) of the CCA by proposed section
577BA is taken not to engage in anti-competitive conduct for the
purposes of Part XIB of the CCA.

Proposed subsection 577BA(2)
specifies that the giving by Telstra of a draft structural
separation undertaking, as well as the giving of a migration plan
in accordance with an in-force structural separation undertaking is
authorised for the purposes of subsection 51(1) of the CCA.
In addition, the giving of a variation to either an in-force
structural separation undertaking or an in-force migration plan is
authorised for the purposes of subsection 51(1) of the CCA.
This provision is intended to avoid any suggestion that actions by
Telstra to put in place, or vary, its structural separation
undertaking and migration plan could put Telstra in contravention
of Part IV of the CCA.

­
Telstra and an NBN corporation enter into a contract, arrangement
or understanding (here abbreviated to ‘agreement’)
prior to a structural separation undertaking coming into force;
and

­ the
operative provisions in the agreement are subject to a condition
precedent relating to a structural separation undertaking coming
into force;

then:

­ the
entering into of that agreement by Telstra and the NBN corporation
is authorised; and

­ if
a copy of the agreement was given to the ACCC before the ACCC had
accepted the undertaking —conduct engaged in by Telstra and
the NBN corporation or another NBN corporation to give effect to
that written agreement is authorised after the SSU has come into
force. This will allow the ACCC to scrutinise the agreements
between Telstra and NBN Co before the ACCC decides whether to
accept the undertaking. If agreements are not made in
writing, then they must be reduced to writing so that a copy can be
given to the ACCC.

The reference in proposed subsection 577BA(3)
to ‘operative provisions’ of the agreement being
subject to a condition precedent is intended to acknowledge that
there may be some mechanical or procedural provisions in such
agreements (such as provisions relating to confidentiality) that
take effect from the time the agreement is entered into.
Inclusion of provisions of this kind is not intended to prevent an
agreement from being the subject of the authorisation under
proposed subsection 577BA(3).

­
Telstra and an NBN corporation enter into a contract, arrangement
or understanding (here abbreviated to ‘agreement’)
and:

­ the
agreement contains a ‘migration provision’;

then:

­ the
entering into of that agreement by Telstra and the NBN corporation
is authorised; and

­
conduct engaged in by Telstra or the NBN corporation prior to the
structural separation undertaking coming into force in order to
give effect to the migration provision is authorised, unless before
the conduct was engaged in:

o the
ACCC had refused to accept the most recent draft structural
separation undertaking given to it by Telstra; or

o
Telstra had given the ACCC a draft structural separation
undertaking that was conditional on the occurrence within a
specified period of specified events, and one of those events has
not occurred within that period.

Because the conduct in question in proposed
subsection 577BA(5), to give effect to a provision of the
agreement, must be engaged in at a time prior to a structural
separation undertaking coming into force, this has the practical
effect that the agreement under that proposed subsection must also
be entered into prior to a structural separation undertaking coming
into force.

The term ‘migration provision’ is
given meaning by proposed subsection 577BA(11). A migration
provision is:

o a provision that relates to Telstra
ceasing to supply fixed-line carriage services over its own copper
network or commencing to supply such services using the national
broadband network (see the definition of this term in proposed
subsection 577BA(12), and the explanation below); or

o a provision that relates to the
provision of services by Telstra to NBN Co (or vice versa) in
connection with that migration; or

o a provision that provides for
Telstra to give NBN Co information (or vice versa) in connection
with that migration.

‘National broadband network’ is
defined in proposed subsection 577BA(12) and means a
telecommunications network for the high speed carriage of
communications, where an NBN corporation is involve in the creation
or development of the network.

Subsections 577BA(4) and (5) will allow
Telstra to enter into agreements with NBN Co and other NBN
corporations in the expectation of the ACCC accepting a structural
separation undertaking that is submitted to it. The
authorisation of conduct provided by proposed subsection 577BA(5)
will cease to apply if the ACCC rejects a structural separation
undertaking given to it by Telstra, but will recommence if Telstra
then gives the ACCC a new structural separation undertaking for the
ACCC’s consideration and possible approval - this is
the effect of proposed paragraph 577BA(5)(e).

Similarly, if the ACCC has accepted a
structural separation undertaking given to it by Telstra subject to
the occurrence of certain events within a specified period (see
proposed section 577AA), and at least one of those events does not
occur during that period, then the structural separation
undertaking will not come into force. In this circumstance,
the authorisation of conduct provided by proposed
subsection 577BA(5) will also cease to apply - this is
the effect of proposed paragraph 577BA(5)(f).

­
Telstra and an NBN corporation enter into a contract, arrangement
or understanding (here abbreviated to ‘agreement’);
and

­
Telstra enters into that agreement in order to comply with an
in-force structural separation undertaking:

then

­ the
entering into of that agreement by Telstra and the NBN corporation
is authorised; and

­
conduct engaged in by Telstra or the NBN corporation (or another
NBN corporation) to give effect to that agreement is
authorised.

This proposed provision will ensure that
contractual and similar arrangements between Telstra and NBN Co,
and other NBN corporations, that Telstra commits to in order to
fulfil obligations arising under its structural separation will not
contravene Part IV of the CCA. Telstra will be able to
specifically identify in its structural separation undertaking the
contracts, arrangements or understandings that it will enter into
with NBN corporations and that will benefit from the authorisation
afforded by this proposed provision. This will enable the
ACCC to scrutinise, at the time it is considering whether to accept
a structural separation undertaking, the types of arrangements and
conduct that will be authorised.

If Telstra and NBN Co enter into an agreement
in accordance with proposed subsection 577BA(8) and then vary
that agreement, that variation will take the form of a new
agreement which will, if entered into by Telstra in order to comply
with an in-force structural separation undertaking, also be covered
by the authorisation provided by this proposed subsection.

For clarity, the Minister is also empowered
(under proposed subsection 577BA(9)) to determine, by legislative
instrument, that the entering into of a particular contract,
arrangement or understanding between Telstra and NBN Co was
required in order for Telstra to comply with an in-force structural
separation undertaking, thereby providing certainty that both the
entering into, and giving effect to, that contract, arrangement, or
understanding is authorised under proposed subsection
577BA(8). This legislative instrument will be subject to
Parliamentary scrutiny and disallowance.

Proposed subsection 577BA(6) provides that
conduct engaged in by Telstra in order to comply with an in-force
structural separation undertaking is authorised. Telstra is
required to set out in its undertaking the activities that it will
engage in for the purposes of achieving structural separation (see
proposed paragraph 577A(1)(b)). This provision ensures that
Telstra’s engagement in those activities will not place
Telstra in contravention of Part IV of the CCA.

As part of the process of structurally
separating, Telstra may dispose of assets. Proposed
subsection 577BA(7) provides a particular authorisation relating to
the disposal of assets by Telstra under its structural separation
undertaking. The acquisition of an asset from Telstra, by a
person specified by Telstra in an in-force structural separation
undertaking, where disposal of that asset is required in order for
Telstra to comply with that undertaking, is authorised.
‘Asset’ in this context is defined in proposed
subsection 577BA(12). Any disposal of assets under
Telstra’s structural separation undertaking would be subject
to the requirement at proposed subsection 577BA(7) that Telstra
must identify the person by whom the asset is being acquired.
The general provision (proposed subsection 577BA(6)) authorising
conduct under an in-force structural separation is not intended to
apply to the disposal by Telstra of assets under a structural
separation undertaking.

Proposed sections 577BB-577BF deal with the
concept of a migration plan, which is a separate document under
Telstra’s structural separation undertaking that Telstra will
give to the ACCC for the ACCC’s acceptance. The
migration plan will deal with matters concerning processes involved
in the migration of Telstra’s customers from its own
fixed-line network to the national broadband network. It will
also deal with the timing of those processes, by either setting out
a timetable for action or setting out a method for determining such
a timetable (see proposed subparagraphs 577BB(2)(b)(i) and
(ii)). Proposed subsection 577BA(10) provides a specific
authorisation for conduct engaged in by Telstra or an NBN
corporation for the purposes of determining a timetable for the
taking of that action under the migration plan, provided that the
conduct is consistent with the method that is set out in the
migration plan.

Proposed
Subdivision B—Migration Plan

A migration plan is a separate document under
the structural separation undertaking that Telstra will give to the
ACCC which would contain detail of any structural separation
arrangement involving a migration of its retail customers to the
national broadband network. It is up to Telstra whether or
not to include a migration plan under its structural separation
undertaking. It is open to Telstra to submit the migration
plan to the ACCC at a later time than its draft structural
separation undertaking: Telstra can elect to give its migration
plan to the ACCC after its structural separation undertaking has
come into force.

If Telstra proposed a structural separation
arrangement involving a migration of its retail customers to the
national broadband network, then the specific details of that
migration (such as the timing and sequence of the migration of
customers in various geographic regions) may well not be known at
the time that Telstra lodges a structural separation undertaking
with the ACCC. One reason for this is that the geographic
sequencing of and the timing of the migration would be dependent on
the timing of the roll-out of the national broadband network.
For this reason, Telstra has the flexibility to lodge a migration
plan with the ACCC either immediately after it gives the ACCC a
structural separation undertaking under proposed section 577A, or
at a later time.

The migration plan is a document that Telstra
will separately lodge with the ACCC, which will be considered and
approved by the ACCC separately from the structural separation
undertaking, and that will deal with matters concerning the timing
of, and processes involved in, the migration of customers from
Telstra’s own fixed-line network to the national broadband
network.

Given that a migration plan would deal with
steps to be taken in migrating customers to the national broadband
network, it is expected that Telstra would consult closely with NBN
Co in the preparation of any migration plan.

Once a migration plan is approved by the ACCC,
the provisions of that plan will be treated as provisions of the
in-force structural separation undertaking.

Proposed
section 577BB Migration plan
principles

Proposed section 577BB provides that the
Minister may determine in writing specified ‘migration plan
principles’. The migration plan principles will set out
the mandatory elements of a migration plan. The effect of the
migration plan principles is to define the scope of the migration
plan: if the ACCC is satisfied that a draft migration plan
submitted to it by Telstra complies with the migration plan
principles, then the ACCC must approve the plan (see proposed
paragraph 577BD(2)(a)).

It is expected that the migration plan
principles will deal with matters such as requiring customers of
Telstra’s competitors to receive equivalent treatment in
migrating from Telstra’s copper network to the NBN to that
received by Telstra’s retail customers.

Before making a determination setting out
migration plan principles the Minister must seek public comments,
for a period of 14 days, on a draft of the determination. The
same process applies to any variation of the determination once it
has been made (see proposed subsection 577BB(2)).

The Minister’s determination setting out
the migration plan principles is not a legislative instrument
(proposed subsection 577BB(4)). This is a substantive
exemption from the LIA. In the absence of proposed subsection
577BB(4), a determination setting out migration principles would
meet the definition of a ‘legislative instrument’ in
the LIA as it would determine regulatory requirements for Telstra
to meet in preparing its migration plan under the structural
separation arrangements. The reason for exempting this
determination from the LIA is that Telstra will need a high degree
of certainty about the principles before developing its migration
plan. Because the migration plan will form part of
Telstra’s structural separation undertaking (see proposed
subsection 577BE(5)) and because its acceptance by the ACCC could
be a specified event to which the entry into force of a structural
separation undertaking is subject (see proposed section 577AA),
Telstra will need clarity on the matters that it will be required
to address in its migration plan. The migration plan
principles will also be subject to a public consultation process
and will be published on the Department’s website to provide
transparency on the matter (proposed subsection 577BB(3)).

Proposed
section 577BC Migration plan

Proposed paragraph 577A(1)(b) of the Tel Act
provides that Telstra’s structural separation undertaking can
set out specified action that Telstra will take, or will refrain
from taking, in connection with the outcome specified at proposed
paragraph 577A(1)(a). Proposed subsection 577BC(1)
establishes that the actions Telstra specifies that it will take in
its structural separation can include giving the ACCC a draft
migration plan, once the relevant structural separation undertaking
has come into force. (Note that by virtue of proposed section
577BDA, Telstra will be able to submit a migration plan
before its structural separation undertaking comes into
force.)

The requirements of a draft migration plan are
set out at proposed subsection 577BC(2): it must specify the
action that Telstra will take in relation to the steps involved in
migrating fixed-line services that it supplies to customers from a
network over which Telstra is in a position to exercise control, to
the national broadband network. It must also set out a
timetable for the taking of that action, or a method for
determining such a timetable: this is intended to permit Telstra to
arrive at a timetable for undertaking migration in consultation
with other relevant parties, for instance NBN Co or other NBN
corporations (see also proposed
subsection 577BA(10)).

The relevant fixed-line carriage services and
telecommunications networks are those which need to be the subject
of Telstra’s in-force structural separation undertaking:
proposed subsection 577BC(2) is an ‘associated
provision’ within the meaning of proposed subsection 577A(14)
(see the explanatory note for that proposed provision, above).

‘National broadband network’ is
defined in proposed subsection 577BC(8). An explanation of
this term is provided above, in relation to proposed
subsection 577BA(12).

For the purposes of proposed section 577BC,
‘fixed-line carriage service’ is defined in proposed
subsection 577BC(8), and has the same meaning as in proposed
section 577A: a carriage service supplied using a line to
premises occupied or used by an end-user, or a service that
facilitates the supply of such a carriage service (eg. an
infrastructure-based service that is not of itself a carriage
service).

In addition, a draft or final migration plan
may contain provisions dealing with other matters specified by the
Minister in a written instrument (proposed
subsection 577BC(3)), and must not contain provisions dealing
with matters set out in a further written instrument (proposed
subsection 577BC(4)). Written instruments made for this
purpose are not legislative instruments. This is a
substantive exemption from the LIA. The reason for exempting
this instrument from the LIA is to give Telstra a high degree of
certainty about what the migration plan may contain - see
further the explanation provided in relation to proposed subsection
577BB(4). An instrument made for this purpose must be
published on the Department’s website.

Telstra may only submit a draft migration plan
to the ACCC if a determination is in force setting out the
migration plan principles (see proposed subsection 577BC(5)).
This will ensure that the Minister has the opportunity to set out
the important principles which a migration plan must comply with
before Telstra submits details of any proposed migration to the
ACCC for its consideration.

It is expected that Telstra would consult
closely with NBN Co in the preparation of any migration plan, given
the subject matter of the plan involves Telstra commencing to
supply services over the national broadband network.

Proposed
section 577BD Approval of draft migration plan by
the ACCC—plan given after undertaking about structural
separation comes into force

Proposed section 577BD sets out what the ACCC
must do when it receives a draft migration plan from Telstra after
Telstra’s structural separation undertaking comes into
force. (Proposed section 577BDA permits Telstra to give the
ACCC a draft migration plan before its structural separation comes
into force, and sets out a different process for the ACCC to follow
in such a case.)

First, it must publish the draft migration
plan on its website along with a notice seeking comments, and
invite submissions to be provided to the ACCC within a 28-day
period. The ACCC must publish on its website each submission
it receives within this period, and must consider those submissions
(see proposed subsection 577BD(3)).

Having considered any submissions it receives
during that 28-day period, if the ACCC is satisfied that the draft
migration plan Telstra has submitted complies with the migration
plan principles determined by the Minister under proposed
subsection 577BB(1), the ACCC must approve the plan.
Otherwise, it must refuse to approve the plan, and direct Telstra
to give it a replacement migration plan that does comply with those
principles within 30 days after notice is given to it (proposed
subsection 577BD(2)). Whether it approves or refuses to
approve the draft migration plan, the ACCC must notify Telstra as
soon as practicable after making the decision (proposed
subsection 577BD(6)).

If Telstra receives such a direction from the
ACCC to submit a replacement migration plan to the ACCC, Telstra
must comply with the direction (proposed
subsection 577BD(4)). By virtue of clause 1 of Schedule
1 to the Tel Act, this requirement is a condition of
Telstra’s carrier licence, and failure to comply would render
Telstra subject to a range of possible enforcement action.
The ACCC will consider and make a decision about the undertaking
that Telstra gives to the ACCC in compliance with the direction
under proposed section 577BDB.

Proposed subsection 577BD(5) provides that, if
Telstra provides the ACCC with a replacement plan in accordance
with a direction received from the ACCC, then the replacement plan
is treated as a draft migration plan given to the ACCC in
accordance with a structural separation undertaking that is in
force. This means that wherever the Tel Act refers to Telstra
giving the ACCC a draft migration plan “in accordance with
its structural separation undertaking”, that reference will
include a draft migration plan given to the ACCC in response to a
direction from the ACCC under proposed section 152BD. An
example of such a reference is in proposed new subclause 76(2) of
Schedule 1 to the Tel Act (inserted by item 31), which has the
effect that the requirement on Telstra to give the Minister a draft
functional separation undertaking will cease if Telstra’s
structural separation undertaking requires it to give the ACCC a
migration plan, Telstra has given the ACCC a draft migration plan
in accordance with the undertaking , and the migration plan
has been approved by the ACCC. Proposed subsection 577BD(5)
ensures that mechanism will operate appropriately whether the ACCC
accepts the first draft migration plan given to it by Telstra, or a
later plan given to it by Telstra in response to a direction after
the ACCC has refused
to approve the first draft migration plan.

Proposed
section 577BDA Approval of draft migration plan
by the ACCC—plan given before undertaking about structural
separation comes into force

The process for the ACCC’s consideration
of a draft migration plan given to it in accordance with proposed
subsection 577BDA(1) is different to the process the ACCC would
follow if Telstra were to give it a draft migration plan after the
structural separation undertaking had come into force.

Under proposed section 577BD, where
Telstra gives the ACCC a draft migration plan after the structural
separation undertaking has come into force and the ACCC refuses to
approve that plan, then the ACCC directs Telstra to prepare
a replacement migration plan and Telstra must comply with
that direction.

Where Telstra gives the ACCC a draft migration
plan under proposed section 577BDA before the structural
separation undertaking has come into force and the ACCC refuses to
approve that plan, then the ACCC requests Telstra to prepare
a replacement migration plan and it is for Telstra to decide
whether or not to comply with that request.

The reason for this distinction is that, in
order to be able to give the ACCC a draft migration plan after
it gives its structural separation undertaking to the ACCC but
before the structural separation undertaking comes into force,
Telstra must have nominated the acceptance of a draft migration
plan by the ACCC as a specified event under proposed section
577AA. As described in the notes for proposed
section 577AA, the effect of this nomination is that any
decision by the ACCC to accept the structural separation
undertaking must be subject to the occurrence within the specified
period (see proposed subsection 577AA(4)) of the specified
event. In this context, this will mean that Telstra’s
structural separation undertaking will not come into force unless
the ACCC approves a draft migration plan within the specified
period.

This mechanism allows Telstra to have a key
role in deciding whether its structural separation undertaking will
come into force at all, depending on whether it is willing to abide
by changes sought to be made to its draft migration plan by the
ACCC. The different process established by proposed section
577BDA (under which the ACCC may only request Telstra to provide a
replacement migration plan if the ACCC refuses to approve a draft
migration plan given to it by Telstra) will permit Telstra to
decide not to provide a replacement migration plan to the ACCC if,
on the basis of the changes to the migration plan sought by the
ACCC in its request, Telstra determines it does not wish to
proceed. In this circumstance, at the end of the specified
period under section 577AA Telstra’s structural
separation undertaking would not come into force, because the ACCC
would not have accepted a migration plan. A result of this is
that the functional separation regime in proposed Part 9 of
Schedule 1 to the Tel Act would be triggered.

If Telstra gives the ACCC a draft migration
plan (‘the initial plan’) after Telstra’s
structural separation undertaking comes into force, and the ACCC
refuses to approve that draft plan, then the ACCC must direct
Telstra to provide a replacement draft migration plan (proposed
subparagraph 577BD(2)(b)(ii)), and Telstra must comply with that
direction (proposed subsection 577BD(4)). Proposed section
577BDB sets out what the ACCC must do when it receives a
replacement draft migration plan from Telstra in accordance with
such a direction.

The process is the same as the process under
proposed section 577BD for the ACCC’s consideration of the
initial plan, which is described in detail in the notes for that
provision above.

Notably, if the ACCC refuses to approve the
replacement draft migration plan given to it by Telstra, then it
must direct Telstra to provide a further replacement draft
migration plan (see proposed subparagraph 577BDB(2)(b)(ii)), and
Telstra must comply with that direction (proposed subsection
577BDB(4)). If this occurs, then the ACCC considers the
further draft replacement plan in accordance with proposed section
577BDB: that is, the section is recursive.

Proposed subsection 577BDB(5) provides that,
if Telstra provides the ACCC with a further replacement plan in
accordance with a direction received from the ACCC under proposed
subparagraph 577BDB(2)(b)(ii), then the replacement plan is treated
as a draft migration plan given to the ACCC in accordance with a
structural separation undertaking that is in force. The
reason for this is explained above in the notes for proposed
section 577BD.

Proposed
section 577BDC Approval of draft migration plan
by the ACCC—plan given in response to a
request

If Telstra gives the ACCC a draft migration
plan (‘the initial plan’) after Telstra’s
structural separation undertaking comes into force, and the ACCC
refuses to approve that draft plan, then the ACCC must request
Telstra to provide a replacement draft migration plan (proposed
subparagraph 577BDA(2)(b)(ii)), and Telstra may choose to provide a
replacement draft migration plan in accordance with that
request. Proposed section 577BDC sets out the process the
ACCC must follow when it receives a replacement draft migration
plan from Telstra in accordance with such a request.

The process is the same as the process under
proposed section 577BD for the ACCC’s consideration of the
initial plan, which is described in detail in the notes for that
provision, above.

Similar to the situation under proposed
section 577BDB, if the ACCC refuses to approve the replacement
draft migration plan given to it by Telstra, then it must request
Telstra to provide a further replacement draft migration plan (see
proposed subparagraph 577BDC(2)(b)(ii)), and Telstra may
choose to do so. If Telstra does so, then the ACCC considers
the further draft replacement plan in accordance with proposed
section 577BDC: like proposed section 577BDB, this section is
recursive.

Proposed
section 577BE Effect of approval of draft
migration plan

Proposed section 577BE provides for the effect
of the approval of a draft migration plan. On approval, a
draft migration plan becomes a final migration plan. The
provisions of a final migration plan are treated as though they
were provisions of the in-force structural separation undertaking
under which the migration plan has been required (proposed
subsection 577BE(5)). This means that compliance by Telstra
with an in-force structural separation undertaking includes
compliance with a final migration plan. Wherever the Bill
refers to Telstra “complying with an undertaking in force
under section 577A” (see for example proposed section 577AD),
this will also include compliance by Telstra with a final migration
plan.

The ACCC is required to publish a final
migration plan on its website as soon as possible after it comes
into force. The time that the final migration plan comes into
force is ascertained in accordance with proposed subsections
577BE(2) and (3).

The effect of proposed subsection 577BE(7) is
that a final migration plan may provide for the ACCC to perform
functions or to exercise powers in relation to the plan. This
is intended to permit the migration arrangements to operate
flexibly, by ensuring that the undertaking can provide for the ACCC
to make decisions on particular matters at a future point. A
similar provision applies with respect to the structural separation
plan generally: see proposed subsection 577A(8).

Proposed subsection 577BE(8) clarifies that a
final migration plan is not a legislative instrument.

Proposed
section 577BF Variation of final migration
plan

Although provisions of the final migration
plan are treated as provisions of the structural separation
undertaking, the process set out under proposed section 577B for
variation of a structural separation undertaking does not apply to
the provisions of a final migration plan (see proposed subsection
577B(2)). Instead, proposed section 577BF provides a
specific mechanism for Telstra to vary a final migration plan,
which requires the ACCC to follow a process similar to the process
it is required to follow when considering the initial draft
migration plan given to it by Telstra. The ACCC must consult
publicly on a proposed variation to a final migration plan
(proposed subsection 577BEF(4)), although the requirement for
consultation does not apply to minor variations. The ACCC
must approve the variation if it is satisfied that the final
migration plan, as varied, complies with the migration plan
principles; otherwise, it must refuse to approve the variation
(proposed subsection 577BF(2)). The ACCC is required to
publish on its website copies of approved variations to the final
migration plan.

Proposed subsection 577C(1) allows the ACCC to
accept a written undertaking by Telstra that Telstra will cease to
be in control of a hybrid fibre-coaxial network in Australia at all
times after the period specified in the undertaking. Under
proposed paragraph 577C(1)(b) Telstra is required, in its
undertaking, to set out specified action that it will take and/or
refrain from taking in connection with the undertaking.

Any hybrid fibre-coaxial network Telstra may
acquire in any country other than Australia is not the subject of
an undertaking under proposed section 577C. A written
undertaking given by Telstra for the purposes of proposed section
577C, would only require Telstra to cease to be in control of a
hybrid fibre-coaxial network in Australia at all times after
the period specified in the undertaking.

Proposed subsection 577C(2) indicates that the
period specified in the undertaking must not be longer than 12
months.

Proposed subsection 577C(4) provides that the
undertaking may not be withdrawn after it has been accepted by the
ACCC. This provision is aimed at ensuring that careful
consideration has been given to the matters proposed in the
undertaking before it is given, in the knowledge that if the
undertaking is accepted by the ACCC, the undertaking will become
final. This has the effect that Telstra could withdraw an
undertaking given to the ACCC up to the point the ACCC accepts the
undertaking. If it is clear that the ACCC has concerns about
an undertaking Telstra has given it, Telstra will be able to
withdraw and amend the undertaking, and resubmit the amended
undertaking to the ACCC for its consideration. The reason for
this is the same as the reason for the corresponding provision in
proposed section 577A, explained in the note for that provision,
above.

Proposed subsection 577C(5) provides that an
undertaking about hybrid fibre-coaxial networks may provide for the
ACCC to perform functions or to exercise powers in relation to the
undertaking. This is intended to permit the undertaking to
operate flexibly, by ensuring that the undertaking can provide for
the ACCC to make decisions on particular matters at a future
point.

Proposed
section 577CA Acceptance of undertaking about
hybrid fibre-coaxial networks may be subject to the occurrence of
events

Proposed section 577CA allows the ACCC’s
decision to accept an undertaking about hybrid fibre-coaxial
networks under proposed subsection 577C(1) to be expressed to
be subject to the occurrence of one or more specified events within
a specified period after the undertaking is accepted, with those
events having been nominated by Telstra at the time it gave its
undertaking to the ACCC. Proposed section 577CB describes
when an undertaking about hybrid fibre-coaxial networks comes into
force. Proposed section 577CC requires the ACCC to publish an
undertaking about hybrid fibre-coaxial networks. Proposed
section 577CD has the effect of making compliance with an in-force
undertaking about hybrid fibre-coaxial networks a condition of
Telstra’s carrier licence.

The provisions of proposed sections 577CA,
577CB, 577CC and 577CD correspond to the provisions of proposed
sections 577AA, 577AB, 577AC and 577AD, which are described above,
but apply in relation to undertakings about hybrid fibre-coaxial
networks.

Proposed section 577D contains provisions
setting out the circumstances under which an undertaking about
hybrid fibre-coaxial networks in force under proposed
section 577C could be varied.

Proposed subsection 577D(1) provides that
proposed section 577D only applies if an undertaking is in force
under proposed section 577C.

Proposed subsection 577D(2) allows Telstra to
give the ACCC a variation of the undertaking in so far as the
undertaking is covered by proposed paragraph 577C(1)(b).
This means Telstra is permitted to propose variations as to the
action it will take or refrain from taking in connection with the
requirement set out in proposed paragraph 577C(1)(a).
However, Telstra is not permitted to propose variations that alter
the character of the undertaking as described by reference to
proposed paragraph 577C(1)(a).

Proposed subsection 577D(3) provides that
after considering the variation, the ACCC must either accept or
reject the variation.

Proposed subsections 577D(4) and (5) confirm
that the variation takes effect when it is accepted by the ACCC and
that the ACCC must publish the variation on its website as soon as
practicable.

Proposed subsection 577E(1) allows the ACCC to
accept a written undertaking that Telstra will not be in a
position to exercise control of a subscription television
broadcasting licence at all times after the end of the period
specified in the undertaking. Under such an undertaking, it
is envisaged Telstra would no longer be able to actively
participate in the subscription television market. Telstra
currently has a 50 per cent stake in the largest pay television
provider, Foxtel. Under proposed paragraph 577E(1)(b) Telstra
is required, in its undertaking, to set out specified action that
it will take or refrain from taking in connection with the
undertaking.

Proposed subsection 577E(2) indicates the
period specified in the undertaking must not be longer than 12
months.

Proposed subsection 577E(3) indicates that the
undertaking must be expressed to be an undertaking under proposed
section 577E, so that when the ACCC receives the undertaking there
can be no doubt as to whether the undertaking was intended to be
given in accordance with proposed section 577E.

Proposed subsection 577E(4) provides that the
undertaking may not be withdrawn after it has been accepted by the
ACCC. This provision is aimed at ensuring that careful
consideration has been given to the matters proposed in the
undertaking before it is given, in the knowledge that if the
undertaking is accepted by the ACCC, the undertaking will become
final. This has the effect that Telstra could withdraw an
undertaking given to the ACCC up to the point that the ACCC accepts
the undertaking. If it is clear that the ACCC has concerns
about an undertaking Telstra has given it, Telstra will be able to
withdraw and amend the undertaking, and resubmit the amended
undertaking to the ACCC for its consideration. The reason for
this is the same as the reason for the corresponding provision in
proposed sections 577A and 577C, explained in the note for
proposed section 577A, above.

Proposed subsection 577E(5) provides that an
undertaking about subscription television broadcasting licences may
provide for the ACCC to perform functions or to exercise powers in
relation to the undertaking in accordance with the
undertaking. This is intended to permit the undertaking to
operate flexibly, by ensuring that the undertaking can provide for
the ACCC to make decisions on particular matters at a future
point.

Proposed subsection 577E(6) provides that for
the purposes of proposed section 577E, the question of whether
Telstra is in a position to exercise control of a subscription
television broadcasting licence is to be determined under Schedule
1 to the BSA.

Proposed
section 577EA Acceptance of undertaking about
subscription television broadcasting licences may be subject to the
occurrence of events

Proposed
section 577EB When undertaking about subscription
television broadcasting licences comes into force

Proposed section 577EA allows the
ACCC’s decision to accept an undertaking about subscription
television broadcasting licences under proposed
subsection 577E(1) to be expressed to be subject to the
occurrence of one or more specified events within a specified
period after the undertaking is accepted, with those events having
been nominated by Telstra at the time it gave its undertaking to
the ACCC. Proposed section 577EB describes when an
undertaking about subscription television broadcasting licences
comes into force. Proposed section 577EC requires the ACCC to
publish an undertaking about subscription television broadcasting
licences. Proposed section 577ED has the effect
of making compliance with an in-force undertaking about
subscription television broadcasting licences a condition of
Telstra’s carrier licence.

The provisions of proposed sections 577EA,
577EB, 577EC and 577ED correspond to the provisions of proposed
sections 577AA, 577AB, 577AC and 577AD (described in detail in the
notes for those provisions, above), and proposed sections 577CA,
577CB, 577CC and 577CD, but apply in relation to undertakings about
subscription television broadcasting licences.

Proposed section 577F contains provisions
setting out the circumstances under which an undertaking about
subscription television broadcasting licences in force under
proposed section 577E could be varied.

Proposed subsection 577F(1) provides that
proposed section 577F only applies if an undertaking is in force
under proposed section 577E.

Proposed subsection 577F(2) allows Telstra to
give the ACCC a variation of the undertaking in so far as the
undertaking is covered by proposed paragraph 577E(1)(b). This
means Telstra is permitted to propose variations as to the action
it will take or refrain from taking in connection with the
requirement set out in proposed paragraph 577E(1)(a).
However, Telstra is not permitted to propose variations that alter
the character of the undertaking as described by reference to
proposed paragraph 577E(1)(a).

Proposed subsection 577F(3) provides that
after considering the variation, the ACCC must either accept or
reject the variation.

Proposed subsections 577F(4) and (5) confirm
that the variation takes effect when it is accepted by the ACCC and
that the ACCC must publish the variation on its website as soon as
practicable.

Proposed Division
5—Enforcement of undertakings

Proposed
section 577G Enforcement of
undertakings

To enforce the undertakings, proposed
subsection 577G(1) permits the ACCC to apply to the Federal Court
for an order under proposed subsection 577G(2) in the event the
ACCC considers that Telstra has breached an undertaking in force
under proposed section 577A, 577C or 577E.

Proposed subsection 577G(2) sets out the
orders that the Federal Court may make if it is satisfied that
Telstra has breached an undertaking. The Federal Court may
make any or all of the orders set out. Given the importance
of an undertaking in force under proposed Part 33 and the potential
negative impact on competition in the telecommunications industry
if an undertaking is breached, the Federal Court has been given
extensive powers in the range and nature of the orders it may
make.

Proposed subsection 577G(3) provides that, in
addition to the Federal Court’s powers under proposed
subsection 577G(2), the Federal Court has power to make an order
directing any person to do or refrain from doing a specified act
and the power to make an order containing such ancillary or
consequential provisions as the court thinks just.

Proposed subsection 577G(4) provides that,
before making an order under proposed section 577G, the
Federal Court may direct that notice of the application be given to
such persons as it thinks fit and/or be published in such manner as
it thinks fit.

Proposed subsection 577G(5) provides that the
Federal Court may rescind, vary, discharge, or suspend the
operation of an order under proposed section 577G.

Compliance with the undertakings is also a
condition of Telstra’s carrier licence (see proposed sections
577AD, 577CD and 577ED, and clause 1 of Schedule 1 to the Tel
Act). This means that there will be a range of enforcement
options available to the ACCC to ensure compliance by Telstra with
this carrier licence condition, such as formal warnings,
injunctions and recovery of a pecuniary penalty, in addition to the
mechanism provided by proposed section 577G for compliance with
in-force voluntary undertakings.

Proposed Division
6—Limits on allocation of spectrum licences
etc.

Proposed
section 577GA Excluded spectrum
regime

Proposed section 577GA provides that the
Minister may make a legislative instrument imposing the
‘excluded spectrum regime’ on Telstra. The effect
of a ministerial determination imposing the excluded spectrum
regime on Telstra is to apply the rules in certain provisions of
proposed Division 6 of Part 33 of the Tel Act and also proposed
Part 10 of Schedule 1 to the Tel Act, specifically:

- proposed section 577J, which
provides a limitation on the ACMA’s ability to allocate
certain spectrum licences to Telstra;

- proposed section 577K, which
provides that a licensee of certain spectrum licences must not
authorise Telstra to operate radiocommunications devices under the
licence;

- proposed section 577L, which
provides that a licensee of certain spectrum licences must not
assign the whole or part of that licence to Telstra, or otherwise
deal with Telstra in relation to the licence;

- proposed clause 84 of Schedule 1,
which makes it a condition of Telstra’s carrier licence that
Telstra must not be in a position to exercise control of certain
spectrum licences; and

- proposed clause 85 of Schedule 1,
which makes it a condition of Telstra’s carrier licence that
Telstra must not supply a carriage service using a
radiocommunications device under authority of certain spectrum
licences.

Unless the Minister makes a determination
under proposed section 577GA, the rules set out in those provisions
will not apply. Even if the Minister makes a determination
imposing the excluded spectrum regime, the rules in those
provisions will not apply in specific circumstances set out in each
of those provisions. The rules will not apply if each of the
following circumstances is met:

- there is in force a structural
separation undertaking, and either that undertaking does not
require a migration plan to be given to the ACCC or, if it does,
the migration plan has been approved by the ACCC;

- either there is in force an
undertaking about hybrid fibre-coaxial networks, or the Minister
has exempted Telstra from the requirement to have such an
undertaking;

- either there is in force an
undertaking about subscription television broadcasting licences, or
the Minister has exempted Telstra from the requirement to have such
an undertaking.

If those circumstances are satisfied, then it
is not appropriate for the limitations relating to certain spectrum
licences in the provisions described above to apply to
Telstra. For this reason, if the Minister makes a
determination imposing the excluded spectrum regime and at a later
stage the circumstances described above are met, then the rules
described in the provisions listed above will cease to operate.

A determination made by the Minister under
proposed subsection 577GA(1) is a legislative instrument, and will
be subject to Parliamentary scrutiny in accordance with the
LIA.

Proposed
section 577H Designated part of the
spectrum

Proposed subsection 577H(1) sets out ranges of
radiocommunications frequencies that are to be regarded as a
‘designated part of the spectrum’ for the purposes of
the Tel Act. The frequencies identified are considered to be
capable of being used for the provision of advanced wireless
broadband services. In particular, they include frequencies that
may become available for allocation as a result of the cessation of
analog television broadcasting.

Proposed subsection 577H(2) provides that
proposed subsection 577H(1) has effect subject to proposed
subsection 577H(3), which authorises the Minister to determine, by
legislative instrument, that a specified part of the spectrum is
not a ‘designated part of the spectrum’ for the
purposes of the Tel Act. As a large range of spectrum is
identified in proposed subsection 577H(1), it is anticipated that
it may be possible to reduce the amount of spectrum regarded as
‘designated part of the spectrum’ for the purposes of
proposed Part 33.

Proposed subsection 577H(4) authorises the
Minister to determine, by legislative instrument, that a specified
part of the spectrum is a ‘designated part of the
spectrum’ for the purposes of the Tel Act. The ACMA has
the ability, under the Radcom Act, to vary the parameters governing
the allocation of spectrum. Also, new frequency ranges of
spectrum can be identified as useful for particular technologies as
those technologies develop. Therefore, it is important that
there be the capacity to include additional spectrum in the
‘designated part of the spectrum’ for the purposes of
proposed Part 33, particularly if that spectrum is suitable for
advanced wireless broadband services.

It is considered that a ministerial
determination is the appropriate device to add to or reduce the
spectrum regarded as a ‘designated part of the
spectrum’ as this allows for flexibility, as spectrum needs
change over time.

Proposed subsection 577J(1) provides that, if
the excluded spectrum regime applies to Telstra (see proposed
section 577GA), the ACMA must not allocate a spectrum licence to
Telstra if the licence relates to a designated part of the
spectrum. The ACMA is required to determine procedures for
allocation of spectrum licences under section 60 of the Radcom Act
and allocate the relevant licences in accordance with those
procedures under section 62 of the Radcom Act. In determining
procedures under section 60 of the Radcom Act, the ACMA would be
required to accommodate the restriction in proposed subsection
577J(1) and allocate spectrum licences accordingly (see notes under
items 2 and 3, which discuss consequential amendments to sections
60 and 62 of the Radcom Act confirming these matters).

Proposed subsection 577J(2) provides that the
restriction in proposed subsection 577J(1) does not apply if
:

-
a structural separation undertaking given by Telstra is in force
under proposed section 577A and the undertaking is covered by
proposed subsection 577J(2A) (see below);

and one of the following combinations of
undertakings and/or declarations is also in force:

The undertakings in question must be in
force. It is not sufficient that they have been given to the
ACCC, or that they have been accepted by the ACCC. Proposed
sections 577AB, 577CB and 577EB each describe when the
respective undertakings will come into force.

By means of the exemption declaration
provisions in proposed subsections 577J(3) and (5) (discussed
below), the Minister can determine (subject to proposed
subsections 577J(4) and (6), discussed below) whether or not
Telstra is required to provide undertakings under either or both
proposed sections 577C and 577E in addition to the undertaking
required under proposed section 577A.

Proposed subsection 577J(3) allows the
Minister, by written declaration, to exempt Telstra from the
requirement to have an undertaking about hybrid fibre-coaxial
networks under proposed section 577C.

Proposed subsection 577J(4) provides that the
Minister must not make a declaration under proposed subsection
577J(3) unless the ACCC has accepted a structural separation
undertaking given to it by Telstra and the Minister is satisfied
that the undertaking is sufficient to address concerns about the
degree of Telstra’s power in telecommunications
markets. This would require the Minister to give
consideration to a structural separation undertaking that has been
accepted by the ACCC and the characteristics of the structural
separation model set out under that undertaking.

Proposed subsection 577J(4A) clarifies when a
declaration under proposed subsection 577J(3) comes into
force. Proposed subsection 577J(4B) sets out the circumstances in
which the Tel Act has effect as if a declaration under proposed
subsection 577J(3) had never been made by the Minister, because a
condition of acceptance of the undertaking did not occur within the
specified period (see proposed subsections 577AA(7) and (8)).

Proposed subsection 577J(5) allows the
Minister, by written declaration, to exempt Telstra from the
requirement to have an undertaking about subscription television
broadcasting licences under proposed subsection 577E.

Proposed subsection 577J(6) provides that the
Minister must not make a declaration under proposed subsection (5)
unless certain circumstances are met. Proposed subsection
577J(6A) clarifies when a declaration under proposed
subsection 577J(5) comes into force, and proposed subsection
577J(6B) sets out the circumstances in which the Tel Act has effect
as if a declaration under proposed subsection 577J(5) had never
been made by the Minister. These provisions operate in the
same way as proposed subsections 577J(4)-(4B).

Proposed subsection 577J(6C) provides that a
declaration under proposed subsection 577J(3) or (5) cannot be
revoked. This provides certainty that if Telstra is declared
by the Minister to be exempt from the requirement to have an
undertaking under proposed section 577C or 577E, such an exemption
will operate indefinitely.

Proposed subsection 577J(7) provides that a
declaration under proposed subsections 577J(3) or (5) is not a
legislative instrument. This is a substantive exemption from
the LIA. The reason for exempting these declarations from the
operation of the LIA is that Telstra will require a high degree of
certainty about whether it is exempt from the requirement to divest
its Foxtel and hybrid fibre-coaxial network if its structural
separation undertaking is deemed to be sufficient to address its
power in telecommunications markets.

Proposed subsection 577J(8) provides a
definition of ‘telecommunications market’ for the
purposes of proposed section 577J by reference to the definition in
Part XIB of the CCA. That definition will be clarified by the
amendment in Part 3 of Schedule 1 of the Bill: see the notes on
item 211.

Proposed
section 577K Limits on use of certain spectrum
licences by Telstra

Proposed subsection 577K(1) sets out a general
rule that licensees of spectrum licences must not authorise Telstra
to operate radiocommunications devices under a licence that relates
to a designated part of the spectrum, unless specified conditions
are met.

Under section 68 of the Radcom Act, licensees
of spectrum licences may allow other persons to operate
radiocommunications devices under their licence.

Proposed subsection 577K(1) has the effect of
excluding Telstra from the persons who may be authorised by the
licensee of a spectrum licensee in accordance with section 68 of
the Radcom Act to operate radiocommunications devices under the
licence, where the licence relates to a designated part of the
spectrum.

Proposed subsections 577K(2) and (2A) have the
effect that that the rule in proposed subsection 577K(1) does not
apply in certain circumstances, being the same circumstances set
out in proposed subsections 577J(2) and (2A), which are described
in detail in the notes on proposed section 577J, above.

Proposed subsection 577K(3) prohibits a person
from aiding, abetting, counselling or procuring a contravention of
proposed subsection 577K(1), or from otherwise being involved in a
contravention of proposed subsection 577K(1) as set out in proposed
paragraphs 577K(3)(b) to (d).

Proposed subsection 577K(4) indicates that
proposed subsections 577K(1) and (3) are civil penalty
provisions. Accordingly, a person who breached a provision in
proposed subsection 577K(1) or (3) would be subject to the
provisions dealing with breaches of civil penalty provisions under
the Tel Act, including pecuniary penalties for breaches of civil
penalty provisions under Part 31 of the Tel Act.

Proposed subsection 577L(1) prohibits the
licensee of a spectrum licence from assigning the whole or part of
that licence to Telstra or otherwise dealing with Telstra in
relation to the whole or part of the licence, where the licence
relates to a designated part of the spectrum.

Under section 85 of the Radcom Act, licensees
of spectrum licences are authorised to assign or otherwise deal
with the whole or part of their spectrum licence. Proposed
subsection 577L(1) has the effect of excluding Telstra from the
persons who may be assigned or otherwise dealt an interest in the
whole or part of a spectrum licence, where the licence relates to a
designated part of the spectrum.

Proposed subsection 577L(2) provides that the
rule in proposed subsection 577L(1) does not apply in certain
circumstances, being the same circumstances set out in proposed
subsections 577J(2) and (2A) and proposed subsections 577K(2) and
(2A), which are described in detail in the notes on proposed
section 577J, above.

Proposed subsection 577L(3) prohibits a person
from aiding, abetting, counselling or procuring a contravention of
proposed subsection 577L(1), or from otherwise being involved in a
contravention of proposed subsection 577L(1) as set out in proposed
paragraphs 577L(3)(b) to (d).

Proposed subsection 577L(4) indicates that
proposed subsections 577L(1) and (3) are civil penalty
provisions. Accordingly, a person who breached a provision in
proposed subsection 577L(1) or (3) would be subject to the
provisions dealing with breaches of civil penalty provisions under
the Tel Act, including pecuniary penalties for breaches of civil
penalty provisions under Part 31 of the Tel Act.

Proposed Division 7—Other
provisions

Proposed
section 577M Associate

Proposed subsection 577M(1) provides a
definition for an associate of Telstra in relation to the control
of a hybrid fibre-coaxial network, another telecommunications
network, or a company, for the purposes of proposed Part 33.
This definition has been modelled from the definition of associate
in section 6 of the BSA.

Proposed subsection 577M(2) provides that
persons are not associates of each other if the ACCC is satisfied
that the persons do not act together in any relevant dealings
relating to the network or company and neither of the persons is in
a position to exert influence over the business dealings of the
other in relation to the network or company. Subsection
577M(2) recognises that the definition of ‘associate’
in proposed subsection 577M(1) is only intended to be applied in
respect of dealings relating to a network or company. The
ACCC is therefore given the discretion to ensure the definition is
not applied too widely.

Proposed
section 577N Control

Proposed section 577N provides a definition
for ‘control’ for the purposes of proposed Part
33. This definition is modelled from the definition in
section 6 of the BSA.

Proposed
section 577P Control of a company

Proposed section 577P provides that the
question of whether a person is in a position to exercise control
of a company is to be determined under Schedule 1 to the BSA.

However, the definition of
‘associate’ in proposed section 577M applies for this
purpose.

Proposed
section 577Q When Telstra is in a position to
exercise control of a network

Proposed section 577Q sets out rules for
determining the question of whether Telstra is in position to
exercise control of a hybrid fibre-coaxial network or another
telecommunications network. The rules set out have been
modelled from clause 2 of Schedule 2 to the BSA and adapted for the
purposes of proposed Part 33.

Item 31
- At the end of Schedule 1

Item 31 adds proposed Part 9 at the end of
Schedule 1 to the Tel Act. Under proposed Part 9, Telstra is
required to functionally separate its business so that:

·
Telstra conducts its network operations and wholesale functions at
arm’s length from the rest of Telstra;

·
Telstra provides equivalent information on price and non-price
terms to its retail business and non-Telstra wholesale customers;
and

·
this equivalence of treatment is made transparent to the regulator
and competitors via strong internal governance structures.

As functional separation is intended as a
proxy for structural separation, Telstra will not be required to
submit to functional separation under proposed Part 9 of Schedule 1
if it provides a structural separation undertaking which is
accepted by the ACCC under proposed section 577A of the Tel Act
(proposed section 577A is discussed under item 30).

The functional separation of Telstra would be
brought about through a series of steps set out under proposed Part
9 of Schedule 1.

Within 90 days of the commencement of the
provisions in Part 2 of Schedule 2 to the Bill, the Minister must
make a determination setting out additional functional separation
requirements.

Initially, Telstra would be required to
prepare a draft functional separation undertaking setting out,
amongst other things, how it will implement functional
separation. The draft functional separation undertaking must
comply with any requirements that are set out in the requirements
determination.

Telstra is required to comply with a final
functional separation undertaking as a condition of its carrier
licence.

Item 31 also adds proposed Part 10 of Schedule
1 to the Tel Act, which inserts into that Schedule new carrier
licence conditions applying to Telstra that relate to the control
and use by Telstra of certain spectrum licences.

Proposed Part
9 — Functional
separation of Telstra

Proposed Division
1—Introduction

Proposed
clause 68 Simplified outline

Proposed clause 68 provides a simplified
outline of proposed Part 9 of Schedule 1 to the Tel Act, to assist
the reader.

Proposed
clause 69 Definitions

Proposed clause 69 inserts a number of
proposed definitions for the purposes of proposed Part 9 of
Schedule 1. Some of the proposed definitions are discussed
under the explanatory notes for proposed clause 74, below.

Proposed
clause 70 Declared network
services

Proposed clause 70 provides that a
‘declared network service’, for the purposes of
proposed Part 9 of Schedule 1, is a service specified in a
legislative instrument made by the Minister. Under the
functional separation model in proposed Part 9 of Schedule 1, any
declared network service must be provided solely by Telstra’s
wholesale/network business unit (as defined under proposed clause
69), in accordance with the functional separation principles set
out in proposed paragraphs 74(b) and (c) (discussed below).

Proposed
clause 71 Regulated services

Proposed subclause 71(1) provides a definition
of the term ‘regulated service’, for the purposes of
proposed Part 9 of Schedule 1, by reference to the definition of
‘declared service’ within the meaning of Part XIC of
the CCA.

Proposed subclause 71(2) provides that
proposed subclause 71(1) has effect subject to proposed subclause
71(3), which authorises the Minister, by legislative instrument, to
determine a specified service is not a regulated service for the
purposes of proposed Part 9 of Schedule 1. The proposed
provisions for the functional separation of Telstra are naturally
more limited in scope than the telecommunications access regime
under Part XIC of the CCA which has a different and wider
application. It therefore may be the case that not all of the
declared services under the CCA will need to be regulated under the
proposed functional separation model in proposed Part 9 of Schedule
1. Accordingly, it is considered appropriate that the
Minister be authorised to determine specified services are not
regulated services for the purposes of proposed Part 9 of Schedule
1.

Proposed subclause 71(4) authorises the
Minister, by legislative instrument, to determine that a specified
eligible service is a regulated service for the purposes of
proposed Part 9 of Schedule 1. This will allow services to be
regulated under proposed Part 9 of Schedule 1 that are not declared
services under the CCA. For example, a newly developed
eligible service may be identified as a service that should be
regulated under proposed Part 9 of Schedule 1. It may be that
the identified service is not a declared service under the CCA on
the basis that the ACCC has not yet completed the public inquiry
and report required under section 152AL of the CCA before it can
declare the service. The naming of that service as a
regulated service under proposed Part 9 of Schedule 1 to the Tel
Act in a timely manner by way of ministerial determination would
assist by potentially correcting any unfair competitive advantage
before that advantage becomes well established. This
mechanism is appropriate for proposed Part 9 of Schedule 1, given
its limited application when compared against the application of
Part XIC of the CCA.

Proposed
clause 72 Notional contracts

Proposed clause 72 confirms that notional
contracts between Telstra’s business units are to be treated
as if they are actual contracts and any terms and conditions in
such notional contracts are to be treated as if they are actual
terms and conditions. This proposed clause is linked to the
principle that there should be equivalence in relation to the
supply by Telstra of regulated services to Telstra’s
wholesale customers and Telstra’s retail business units
(proposed subclause 74(1)). Under the principle of
equivalence Telstra must contract with its wholesale customers on
the same terms and conditions upon which it contracts with its own
business units. Proposed clause 72 facilitates comparisons
between the terms and conditions upon which Telstra supplies
services to its own retail business units and the terms and
conditions upon which it provides services to its wholesale
customers, in the interest of ensuring the principle of equivalence
is adhered to.

Proposed subclause 73(1) specifies matters
that must be included in a draft or final functional separation
undertaking and also confirms that a draft or final functional
separation undertaking must comply with the functional separation
principles (set out in proposed clause 74) and such requirements as
are specified in a functional separation requirements determination
(under proposed clause 75). Proposed subclause 73(1) sets
parameters for the content of the draft or final functional
separation undertaking. When deciding whether or not to
approve a draft functional separation undertaking, the Minister
would have regard to proposed subclause 73(1). The Minister would
not approve a draft functional separation undertaking under
proposed clause 77 unless, at a minimum, it fits within the
parameters outlined in proposed subclause 73(1).

Proposed paragraph 73(1)(b) indicates that a
draft or final functional separation undertaking must contain
provisions requiring Telstra to establish and maintain a committee
to be known as the Oversight and Equivalence Board. It is
envisaged the Oversight and Equivalence Board would monitor and
support Telstra in complying with the final functional separation
undertaking. It is envisaged that requirements relating to
the Oversight and Equivalence Board, including such things as
duties of the Board and the appointment of members to the Board,
would be specified in the functional separation requirements
determination under proposed clause 75.

Proposed paragraph 73(1)(c) indicates that a
draft or final functional separation undertaking must contain
provisions which require the Oversight and Equivalence Board to
prepare reports about the extent to which Telstra has complied with
the final functional separation undertaking. Reports in
accordance with subparagraph 73(1)(c) are to be prepared on a
quarterly basis and copies of the reports must be given to the ACCC
and to Telstra’s board of directors. This reporting
obligation is aimed at ensuring the Oversight and Equivalence Board
closely monitors Telstra’s compliance with the final
functional separation undertaking and that Telstra is encouraged to
put in place policies and procedures which:

·
support compliance with the final functional separation
undertaking;

·
allow for effective monitoring of Telstra’s level of
compliance with the final functional separation undertaking;
and

·
allow Telstra to take remedial action as soon as possible to
rectify any compliance issues in relation to the final functional
separation undertaking.

The requirement for Telstra to provide a copy
of the report to the ACCC provides a high level of accountability
and allows the ACCC to take appropriate enforcement action in
regard to Telstra’s compliance with the final functional
separation undertaking where considered necessary.

Proposed subclause 73(2) confirms that for the
purposes of subparagraph 73(1)(c)(i) (which requires Telstra to
provide quarterly reports), if a final functional separation
undertaking is taken to be in force throughout a part, but not a
whole, of a particular quarter, the part of the quarter in question
is taken to be a quarter in its own right. For example, if a
final functional separation undertaking came into force on 1
September of any year, the period from the beginning to the end of
September would be taken to be a quarter in its own right and
Telstra would be required to provide a report for that period
(proposed clause 69 provides a definition for
‘quarter’).

Proposed
subclause 73(3) provides that a functional separation undertaking
may provide for the ACCC to perform functions or to exercise powers
in relation to the undertaking in accordance with the
undertaking. This is intended to permit the undertaking to
operate flexibly, by ensuring that the undertaking can provide for
the ACCC to make decisions on particular matters at a future
point.

Proposed
clause 74 Functional separation
principles

Proposed clause 74 sets out the functional
separation principles that apply in regard to the manner in which
the functional separation of Telstra is to be achieved and
maintained. Under proposed paragraph 73(1)(a) any draft or
final functional separation plan must comply with the functional
separation principles. When considering whether or not to approve a
draft functional separation undertaking, it is intended that the
Minister would have regard to the degree to which the draft
undertaking complies with the functional separation principles.

The principle of equivalence -
proposed paragraph 74(a)

The first principle (in proposed paragraph
74(a)) is that there should be equivalence in relation to the
supply by Telstra of its regulated services to Telstra’s
wholesale customers and Telstra’s retail units.

Telstra currently operates a wholesale
business unit which arranges for the supply of network services to
Telstra’s wholesale customers. However, Telstra
currently provides network services to itself via its own fully
integrated business framework. This means that Telstra is in
a position to take advantage of its level of vertical integration
when developing and supplying products in Australia. It also
means that Telstra has the ability and incentive to favour its own
retail business over its wholesale customers when providing access
to network services.

It is intended that the details of how
equivalence would be achieved will be set out in a functional
separation requirements determination under proposed
clause 75.

Telstra would be required to provide specified
network services to itself via its wholesale/network unit on the
same terms and conditions upon which it provides those services to
its wholesale customers. Those services would be supplied in
accordance with ‘notional contracts’ established
between Telstra’s retail and wholesale/network business units
similar to the contracts between Telstra and its wholesale
customers (proposed clause 72 deals with the treatment of notional
contracts).

The
principle of separate retail and wholesale/network business units
- proposed paragraph 74(b)

The second principle (proposed paragraph
74(b)) is that Telstra should maintain one or more retail business
units and a separate wholesale/network business unit.

A business unit is defined under proposed
clause 69 as a part of Telstra. This recognises that in
managing its business, Telstra organises different roles and parts
of the company into individual business units.

This principle requires Telstra to maintain a
single wholesale/network business unit, in accordance with the
definition in proposed clause 69:

-
that supplies:

·
fault detection, handling and rectification;

·
service activation and provisioning;

·
declared network services;

to Telstra’s
retail business units and Telstra’s wholesale customers, in
relation to eligible services; and

-
by which Telstra deals with its wholesale customers.

The wholesale/network business unit must be
separate from Telstra’s retail business units. Under
the proposed definition in clause 69 a retail business unit is a
unit by which Telstra deals with its customers in Australia.

The separation of Telstra’s retail
business units from its wholesale/network unit, together with the
treatment of notional contracts under proposed clause 72, would
support the principle of equivalence (discussed above) by
facilitating comparisons between the terms and conditions upon
which Telstra supplies eligible services from its
wholesale/business unit to its retail business units and its
wholesale customers.

The principle of arm’s length
functional separation between each of Telstra’s retail and
wholesale/network business units - proposed paragraph
74(c)

The third principle (proposed paragraph 74(c))
is that Telstra should maintain arm’s length functional
separation between its wholesale/network business unit and its
retail business units. The principle is directed towards
ensuring that Telstra does not favour its retail business over its
wholesale customers in the provision of regulated services.
Under this principle, Telstra’s wholesale/network business
unit is expected to interact with its retail business units in the
same manner that it would interact with another carrier or carriage
service provider. This includes Telstra ensuring that it puts
measures in place to protect information and knowledge in the
possession of its wholesale/network business unit from its retail
business units in the same manner it would protect that information
and knowledge from another carrier or carriage service
provider.

The fourth principle (proposed paragraph
74(d)) is directed towards ensuring that Telstra has sufficient
systems, procedures and practices in place which support and
facilitate compliance with a final functional separation
undertaking. It is also important that measures are put in
place to allow Telstra’s compliance with a final functional
separation undertaking to be monitored, assessed, and audited so
that assessments can be made of Telstra’s adherence to the
functional separation principles and Telstra’s observance of
the requirements set out in the proposed functional separation
requirements determination.

The
principle of equal consultation - proposed paragraph
74(e)

The fifth principle (proposed paragraph 74(e))
requires Telstra to consult equally with its retail business units
and wholesale customers about proposed services to be supplied by
Telstra’s wholesale/network business unit or developments in
connection with those services. This provision seeks to allow
Telstra’s wholesale customers to compete with Telstra on a
fair and equal basis when supplying services to their customers
which make use of regulated services.

Proposed clause
75 Functional separation requirements
determination

Proposed clause 75 allows the Minister to make
a determination (a functional separation requirements
determination) specifying requirements to be complied with by a
draft or final functional separation undertaking.

Matters that may be dealt with in a functional
separation requirements determination may include the manner in
which the functional separation principles are to be implemented
(proposed subclause 75(2)) and the manner in which a requirement
relating to the proposed Oversight and Equivalence Board, set out
in proposed paragraph 73(1)(b) or (c), is to be met (proposed
subclause 75(3)). Proposed subclause 75(4) makes it clear
that proposed subclauses 75(2) and 75(3) are simply examples of the
matters that may be included in a functional separation
requirements determination and that they do not limit the matters
that may be specified by the Minister in a functional separation
requirements determination.

It is envisaged a functional separation
requirements determination would provide further details regarding
the manner in which the functional separation of Telstra is to be
achieved and maintained and would provide further guidance to
Telstra in formulating its draft functional separation undertaking,
as required under proposed clause 76.

Under proposed subclause 75(5), the Minister
must ensure that a functional separation requirements determination
comes into force within 90 days of the commencement of proposed
clause 75.

Proposed subclause 75(5A) confirms that there
will be no obligation to ensure a functional separation
requirements determination comes into force if, before the end of
the relevant period, either:

- a
structural separation undertaking by Telstra comes into force under
proposed section 577A that requires Telstra to submit a draft
migration plan to the ACCC, and Telstra has given the draft
migration plan to the ACCC and it has been approved by the ACCC;
or

- a
structural separation undertaking by Telstra comes into force under
proposed section 577A that does not require Telstra to submit a
migration plan.

In either of these circumstances, there would
be no requirement for Telstra to submit a draft functional
separation undertaking (see proposed subclause 76(2)) and therefore
a functional separation requirements determination would be
unnecessary.

if the Minister is satisfied that Telstra is
preparing a structural separation undertaking (proposed paragraph
75(5C)(a));

if Telstra has given a structural separation
undertaking to the ACCC but the ACCC has not decided whether to
accept the undertaking (proposed paragraph 75(5C)(b));

if Telstra has given the ACCC a structural
separation undertaking, which has been accepted by the ACCC subject
to the occurrence of the events within a specified period, the
undertaking is not in force and the period has not ended (ie. at
least one of the specified events has not yet occurred) (proposed
paragraph 75(5C)(c)); or

if a structural separation undertaking is in
force, which undertaking provides for Telstra to submit a draft
migration plan to the ACCC, and either:

(a) Telstra
satisfies the Minister that it is in the process of preparing a
draft migration plan (proposed paragraph 75(5C)(d)); or

(b) Telstra has
given a draft migration plan to the ACCC, but the ACCC has not yet
made a decision as to whether to approve the draft migration plan
(proposed paragraph 75(5C)(e)).

These are the same circumstances set out in
proposed subclause 76(4) (discussed below), meaning that after the
Minister has made a functional separation requirements
determination, the Minister may extend the period for Telstra to
provide a functional separation undertaking in the same five
circumstances.

It is appropriate to allow for the Minister to
extend the period for preparing a functional separation
requirements determination in these circumstances; however this is
limited to a maximum overall extension period of 18 months to
ensure that there is an incentive to finalise a structural
separation undertaking, and a migration plan (if applicable). If a
structural separation undertaking has not been accepted by the ACCC
within 21 months of commencement, or if a structural
separation undertaking has been accepted but it requires Telstra to
submit a migration plan to the ACCC and that plan has not been
approved by the ACCC in that timeframe, the Minister must make a
functional separation requirements determination (this is the
effect of proposed subclauses 75(5) and (5B)). Telstra would then
be required to give its draft functional separation undertaking to
the Minister within 90 days (or a longer period specified by the
Minister subject to the conditions in proposed subclause 76(4))
after the functional separation requirements determination comes
into force.

Even if the Minister were to extend the 90-day
period through an instrument under proposed subclause 75(5B), the
Minister could still make a functional separation requirements
determination during that extended period. The effect of
specifying a longer period is to extend the time within which a
functional separation requirements determination must come
into force. It does not prevent the Minister from making a
functional separation requirements determination, and bringing it
into force, before the end of the specified period, for example if
circumstances change during that period.

Proposed subclauses 75(5F) and (5G) make it
clear that the Minister is not required to observe the requirements
of procedural fairness in relation to the making of an instrument
under proposed subclause 75(5B) extending the 90-day period, and is
not required to consider a request to make such an instrument,
including if requested to do so. This will reduce the
opportunity for the use of legal proceedings to disrupt these
procedural steps.

An instrument under proposed subclause 75(5B)
extending the period is not a legislative instrument (proposed
subclause 75(7)). This is a clarifying provision, rather than
a substantive exemption from the LIA. An instrument extending
the period is of an administrative character, simply extending the
period that a functional separation requirements determination is
required to come into force for the reasons explained
above.

Proposed subclause 75(5D) requires the
Minister to table a copy of an instrument under proposed subclause
75(5B) before each House of the Parliament within 15 sitting
days of that House after making the instrument. This means
that although the instrument would not be disallowable, the
instrument would be brought to the Parliament’s
attention.

The effect of proposed subclauses 75(5EB) and
(5EC) is that the rule in proposed subclause 75(5) does not apply
if:

·
the ACCC accepts an undertaking given by Telstra under proposed
section 577A within the period that would apply under proposed
subclause 75(5);

·
that undertaking is expressed to be subject to the occurrence of
one or more specified events within a specified period (see
proposed section 577AA);

·
the specified period (‘post-acceptance period’) ends
after the end of the relevant period under proposed subclause
75(5); and

·
before the end of the post-acceptance period the undertaking comes
into force; and

·
either:

o the
undertaking does not require Telstra to submit a draft migration
plan to the ACCC (see proposed section 577BC); or

o the
undertaking requires Telstra to submit a draft migration plan to
the ACCC, it has done so, and the final migration plan has come
into force before the end of the post-acceptance period.

The effect of proposed subclauses 75(5E) and
(5EA) is that if:

·
the ACCC accepts an undertaking given by Telstra under proposed
section 577A within the period that would apply under proposed
subclause 75(5);

·
that undertaking is expressed to be subject to the occurrence of
one or more specified events within a specified period (see
proposed section 577AA);

·
the specified period (‘post-acceptance period’) ends
after the end of the relevant period under proposed subclause
75(5); and

·
either:

o the
undertaking does not come into force before the end of the
post-acceptance period; or

o the
undertaking comes into force before the end of the post-acceptance
period, the undertaking requires Telstra to submit a draft
migration plan to the ACCC, and a final migration plan does not
come into force before the end of the post-acceptance period.

then:

·
the rule in proposed subclause 75(5) does not apply; and

·
the Minister must ensure that a functional separation requirements
determination comes into force within 90 days of the end of the
post-acceptance period.

Proposed subclauses 75(5E)-(5EA) recognise the
circumstances in which it would be reasonable for the Minister to
wait and verify whether or not an undertaking under proposed
section 577A has come into force (in accordance with proposed
section 577AB) and, if applicable, a final migration plan has
come into force (in accordance with proposed section 577BE) before
being required to make a functional separation requirements
determination. Proposed subclauses 75(5EB)-(5EC) recognise
the circumstances in which a functional separation requirements
determination would no longer be required.

Proposed subclause 75(6) provides that a
functional separation requirements determination is not a
legislative instrument. This reflects the fact that a
direction from a Minister to any person is not subject to
disallowance (see section 44 of the LIA) and the fact that the
instrument made by the Minister under proposed subclause 75(6)
operates as if it were a direction to Telstra to include certain
requirements in its draft functional separation undertaking.

Proposed
clause 76 Draft functional separation undertaking
to be given to Minister

Proposed subclause 76(1) indicates that
Telstra must give the Minister a draft functional separation
undertaking within 90 days after the first functional separation
requirements determination comes into force or a longer period, if
specified in accordance with proposed subclause 76(3).

Proposed subclause 76(2) provides that the
requirement to provide the draft functional separation undertaking
does not apply if:

- a
structural separation undertaking by Telstra comes into force under
proposed section 577A that requires Telstra to submit a draft
migration plan to the ACCC, Telstra has given the draft migration
plan to the ACCC and it has been approved by the ACCC; or

- a
structural separation undertaking by Telstra comes into force under
proposed section 577A that does not require Telstra to submit a
migration plan.

If a structural separation undertaking were in
force under proposed section 577A (complete with any accompanying
migration plan under proposed section 577BC), it would be
unnecessary for Telstra to functionally separate. This is
because structural separation is the strongest form of
organisational separation, which would require Telstra to make
changes to its activities or its company structure.
Therefore, structural separation is the preferred form of
organisational separation for achieving an open access,
wholesale-only market structure.

Proposed subclause 76(3) allows the Minister
to specify in writing a longer period in which a draft functional
separation undertaking is required to come into force for the
purposes of proposed paragraph 76(1)(b).

Proposed subclause 76(4) sets out the
circumstances in which the Minister can extend the period in which
Telstra is required to provide a draft functional separation
undertaking to the Minister. Specifically, the Minister
may only extend the period:

if the Minister is satisfied that Telstra is
preparing a structural separation undertaking (proposed paragraph
76(4)(a));

if Telstra has given a structural separation
undertaking to the ACCC but the ACCC has not decided whether to
accept the undertaking (proposed paragraph 76(4)(b));

if Telstra has given the ACCC a structural
separation undertaking, which has been accepted by the ACCC subject
to the occurrence of the events within a specified period, the
undertaking is not in force and the period has not ended (ie. at
least one of the specified events has not yet occurred) (proposed
paragraph 76(4)(c)); or

if a structural separation undertaking is in
force, which undertaking provides for Telstra to submit a draft
migration plan to the ACCC, and either:

­ Telstra satisfies the Minister that
it is in the process of preparing a draft migration plan (proposed
paragraph 76(4)(d)); or

­ Telstra
has given a draft migration plan to the ACCC, but the ACCC has not
yet made a decision whether to approve the draft migration plan
(proposed paragraph 76(4)(e)).

These mirror the circumstances in which the
Minister may extend the period within which the Minister must
ensure that a functional separation requirements determination
comes into force (see proposed subclause 75(5C)).

Together proposed subclauses 76(3)
and 76(4) will ensure that the functional separation of
Telstra is not brought into being prematurely, which would delay or
make more difficult the implementation of the preferred model:
structural separation.

Proposed subclause 76(6) provides that a
period specified in proposed subclause 76(3) may be ascertained
wholly or partly by reference to the occurrence of a specified
event. Such an event could be, for example, a decision by the
ACCC not to accept a structural separation undertaking. If
the Minister delays the requirement for Telstra to provide a draft
functional separation undertaking because Telstra has submitted a
structural separation undertaking to the ACCC, but the ACCC has not
yet accepted or rejected the undertaking, the Minister may want to
trigger the requirement to provide the draft functional separation
undertaking if the ACCC rejects the structural separation
undertaking. This provision would permit the Minister to set
a date with reference to that event (such as, “within 90 days
of a rejection by the ACCC of the structural separation undertaking
submitted to it by Telstra”).

Proposed subclauses 76(6A) and (7) make it
clear that the Minister is not required to observe the requirements
of procedural fairness in relation to the making of an instrument
under proposed subclause 76(3) extending the 90-day period, and is
not required to consider a request to make such an instrument,
including if requested to do so by Telstra or any other
person. This will reduce the opportunity for the use of legal
proceedings to disrupt these procedural steps.

Proposed subclause 76(8) provides for
publication of an instrument under proposed subclause 76(3) or (5)
on the Department’s website.

Proposed subclause 76(9) provides, for the
avoidance of doubt, that an instrument under proposed subclause
76(3) or (5) is not a legislative instrument.

Proposed clause 77 sets out the manner in
which a draft functional separation undertaking may be approved,
varied or replaced and includes publication and consultation
provisions.

After receiving a draft functional separation
undertaking (original undertaking), the Minister must approve the
original undertaking; vary the original undertaking and approve the
original undertaking as varied; or replace the original undertaking
with another draft functional separation undertaking (replacement
undertaking) and approve the replacement undertaking (proposed
subclause 77(2)). It is envisaged the Minister would exercise
his or her power to vary or replace the draft functional separation
undertaking if the draft functional separation undertaking was
considered deficient with regard to compliance with the functional
separation principles or any requirements specified in the
functional separation requirements determination. The
Minister would be able to add or change measures in the draft
functional separation undertaking to address any shortcomings in
the draft functional separation undertaking, or replace the draft
functional separation undertaking altogether if considered
necessary or desirable. In particular, it is intended that if the
Minister considered that the draft functional separation
undertaking complied with a functional separation principle to a
minimal degree, the Minister might decide to vary or replace the
draft functional separation undertaking in a way that would require
Telstra to meet the principle to a significantly higher degree.

Proposed subclause 77(3) provides that before
making a decision under proposed subclause 77(2), the Minister must
publish a notice on the Department’s website setting out the
original undertaking and inviting submissions about the original
undertaking, with submissions to be provided within 14 days after
publication of the original undertaking. The Minister is
required to give the ACCC a copy of the notice and consider any
advice about the original undertaking given to him or her by the
ACCC within the 44 days after the notice is published. The
Minister must have regard to any advice given by the ACCC. It is
expected that the ACCC would consider the submissions provided to
the Minister before giving its advice to the Minister.

Proposed subclause 77(4) requires the
Minister, before approving an original undertaking as varied under
proposed paragraph 77(2)(b), to give Telstra a notice setting out
the original undertaking as proposed to be varied and inviting
Telstra to make submissions to the Minister regarding the original
undertaking as proposed to be varied within 14 days after receiving
the notice. The Minister is further required to consider any
submissions received from Telstra within that 14-day time
period.

Proposed subclause 77(5) requires the
Minister, before approving a replacement undertaking under proposed
paragraph 77(2)(c), to give Telstra a notice setting out the
proposed replacement undertaking and inviting Telstra to make
submissions to the Minister regarding the proposed replacement
undertaking within 14 days after receiving the notice. The
Minister is further required to consider any submissions received
from Telstra within that 14-day time period.

The consultation provisions in subclauses
77(3)-(5) provide Telstra, the ACCC and the public with an
opportunity to make submissions which the Minister must consider
before approving an original undertaking, and provide for
additional consultation with Telstra before the Minister approves
an original undertaking as varied or a replacement
undertaking. These provisions are aimed at ensuring the
measures set out in the final functional separation undertaking are
robust whilst ensuring the consultation process is undertaken in a
timely and efficient manner.

Proposed subclause 77(6) confirms that the
Minister may ask the ACCC to give the Minister advice, which is
additional to any advice received from the ACCC after a request for
advice under proposed paragraph 77(3)(e), about a matter arising
under proposed clause 77.

Proposed subclause 77(7) requires the Minister
to notify Telstra in writing of a decision under proposed subclause
77(2) as soon as practicable.

Proposed subclause 77(8) provides, for
avoidance of doubt, that an instrument under proposed subclause
77(2) is not a legislative instrument.

Proposed
clause 78 Time limit for making an approval
decision

Proposed subclause 78(2) requires the Minister
to use his or her best endeavours to make a decision under proposed
subclause 77(2) in relation to a draft functional separation
undertaking within 6 months after the draft functional separation
undertaking was given to the Minister. This subclause
recognises the importance of ensuring that the functional
separation of Telstra is achieved in a timely manner, but also
appreciates that the Minister will need adequate time to:

consider the draft functional separation
undertaking and check that it complies with proposed clause
73;

possibly make changes to the draft functional
separation undertaking, which may be influenced by submissions
received under proposed subclause 77(3) or advice received from the
ACCC;

consult with Telstra before making changes to
the draft functional separation undertaking; and

seek additional advice from the ACCC
concerning the draft functional separation undertaking, and
consider that advice.

Proposed
clause 79 Effect of approval

Proposed subclause 79(1) confirms that once a
draft functional separation undertaking is approved under proposed
subclause 77(2) it becomes a final functional separation
undertaking.

Proposed subclause 79(2) confirms that a final
functional separation undertaking comes into force on the day after
the notice of the Minister’s decision under proposed
subclause 77(2) is given to Telstra in accordance with
proposed subclause 77(7).

Proposed subclause 79(3) provides that a final
functional separation undertaking may not be withdrawn. Given
that the implementation of the functional separation of Telstra is
likely to have a significant impact on the telecommunications
industry and the approval of a draft functional separation
undertaking (resulting in the undertaking becoming a final
functional separation undertaking) would have the effect of
triggering the operation of a number of provisions proposed under
the Bill there is a need for certainty and therefore it is
important that a final functional separation undertaking cannot be
withdrawn.

For the avoidance of doubt, proposed subclause
79(4) confirms that a final functional separation undertaking is
not a legislative instrument.

Proposed clause 80 describes the manner in
which a variation to a final functional separation undertaking may
be made. A variation to a final functional separation
undertaking may be made by the Minister, in writing, where Telstra
or another person has requested the variation, or on the
Minister’s own initiative (proposed
subclause 80(2)).

Proposed subclause 80(3) confirms that the
Minister does not have a duty to consider whether to make a
variation under proposed clause 80, whether or not the Minister has
received a request from Telstra or by any other person, or in any
other circumstances.

The publication, consultation and notice
requirements relating to a proposed variation (proposed subclauses
80(4) and (8)), except in relation to minor variations, are the
same as those outlined in proposed clause 77 in relation to the
Minister’s decision to approve the draft final migration
plan.

Proposed subclause 80(5) indicates that the
publication, consultation and notice requirements under proposed
subclause 80(4) do not apply in respect of variations to a final
functional separation undertaking that are of a minor
nature.

Where a proposed variation is of a minor
nature and is not made at the request of Telstra, under proposed
subclause 80(6) the Minister is required to give Telstra a notice
setting out the proposed variation and inviting Telstra to make
submissions to the Minister about the proposed variation within 14
days after the notice is given. The Minister must then
consider any submissions received within that 14-day
period.

Proposed subclause 82(1) provides that if a
final functional separation undertaking is in force, Telstra must
comply with the undertaking. Proposed subclause 82(1) will be
in Schedule 1 to the Tel Act, which contains the standard carrier
licence conditions. A breach of a final functional separation
undertaking by Telstra would therefore be a breach of
Telstra’s carrier licence conditions. Compliance with
carrier licence conditions is a civil penalty provision under
section 68 of the Tel Act. Proposed subclause 82(1) would
have the effect of making Telstra subject to the penalties outlined
in Part 31 of the Act for breach of civil penalty provisions.
Telstra would also be subject to additional enforcement provisions
in the Tel Act for breach of proposed subclause 82(1) (for
example sections 69A and 70, as amended by the Bill).

Proposed subclause 82(2) indicates that
subclause 82(1) would not apply if an undertaking given by Telstra
is in force under proposed section 577A. This provision
confirms that Telstra would not be required to comply with a final
functional separation undertaking if a structural separation
undertaking was in force under proposed section 577A. This is
because functional separation of Telstra would be unnecessary in
the event Telstra were to structurally separate. Structural
separation is a stronger form of organisational separation, which
would require Telstra to make changes to its activities or company
structure. Therefore, structural separation is the preferred
form of organisational separation for achieving an open access,
wholesale-only market structure. The enforcement provisions
relating to the structural separation of Telstra under proposed
section 577A are discussed under the explanatory note for proposed
section 577G, above.

Proposed Part
10 — Control
and use by Telstra of certain spectrum licences

Proposed Part 10 of Schedule 1 to the Tel Act
inserts into that Schedule new carrier licence conditions applying
to Telstra that relate to the control and use by Telstra of certain
spectrum licences.

Proposed Division
1—Introduction

Proposed
clause 83 Simplified outline

Proposed clause 83 provides a simplified
outline of proposed Part 10 of Schedule 1 to the Tel Act to assist
the reader.

Proposed Division
2—Control and use by Telstra of certain spectrum
licences

Proposed
clause 84 Control by Telstra of certain spectrum
licences

Proposed subclause 84(1) provides that, if the
excluded spectrum regime applies to Telstra, Telstra must not be in
a position to exercise control of a licence that relates to a
designated part of the spectrum. The meaning of control of a
spectrum licence, for the purposes of proposed Part 10 of Schedule
1 is addressed under proposed clause 88. The operation
of the excluded spectrum regime is explained above in the note for
proposed section 577GA.

Proposed subclause 84(2) provides that the
restriction in proposed subsection 84(1) does not apply if
:

-
a structural separation undertaking given by Telstra is in force
under proposed section 577A and the undertaking is covered by
proposed subclause 84(3) (see below);

and one of the following combinations of
undertakings and/or declarations is also in force:

The undertakings referred to in proposed
subclause 84(2) must be in force. It is not sufficient that
they have been given to the ACCC, or that they have been accepted
by the ACCC. Proposed sections 577AB, 577CB and 577EB
each describe when the respective undertakings will come into
force.

The circumstances described in proposed
subclauses 84(2) and (3) that describe when the licence condition
imposed by proposed subclause 84(1) does not apply are the same
circumstances set out in proposed subsections 577J(2) and (2A),
577K(2) and (2A), and 577L(2) and (2A), which describe when the
rules imposed by proposed subsections 577J(1), 577K(1) and 577L(1),
respectively, do not apply. The operation of those provisions
is explained in detail in the notes on proposed section 577J,
above.

Proposed
clause 85 Use by Telstra of certain spectrum
licences

Proposed subclause 85(1) provides that Telstra
must not supply a carriage service using a radiocommunications
device authorised for use under a spectrum licence if that licence
relates to a designated part of the spectrum.

Proposed subclause 85(2) provides that the
licence condition imposed by proposed subclause 85(1) does not
apply in certain circumstances, being the same circumstances set
out in proposed subclauses 84(2) and (3), in the notes on proposed
clause 84, above.

Proposed Division 3—Other
provisions

Proposed
clause 86 Associate

Proposed subclause 86(1) provides a definition
for an ‘associate’ of Telstra in relation to the
control of a spectrum licence for the purposes of proposed Part 10
of Schedule 1. This definition has been modelled from
the definition of ‘associate’ in section 6 of the
BSA.

Proposed subclause 86(2) provides that persons
are not associates of each other if the ACCC is satisfied that the
persons do not act together in any relevant dealings relating to
the spectrum licence and neither of them is in a position to exert
influence over the business dealings of the other in relation to
spectrum licence. Proposed subclause 86(2) recognises
that the definition of ‘associate’ in proposed
subclause 86(1) is only intended to be applied in respect of
dealings relating to a spectrum licence. The ACCC is
therefore given the discretion to ensure the definition is not
applied too widely.

Proposed clause
87 Control

Proposed clause 87 provides a definition for
‘control’ for the purposes of proposed Part 10 of
Schedule 1. This definition is taken from section 6 of the
BSA.

Proposed clause
88 When Telstra is in a position to exercise
control of a spectrum
licence

Proposed clause 88 sets out mechanisms for
determining the question of whether Telstra is in a position to
exercise control of a spectrum licence. Proposed section 88
is modelled on the control rules set out in clause 2 of Schedule 1
to the BSA and adapted for the purposes of proposed Part 10 of
Schedule 1 to the Tel Act.

Competition and Consumer Act
2010

Item 32
- Subsection 4(1)

This item amends subsection 4(1) of the CCA by
inserting a definition for ‘Telstra’, by reference to
the meaning in the Telstra Corporation Act 1991 .

Item 33
- At the end of section 151AJ

Section 151AJ sets out the circumstances in
which a carrier or a CSP is said to engage in anti-competitive
conduct for the purposes of Part XIB of the CCA.

Item 33 makes an amendment as a result of the
insertion of proposed section 577BA of the Tel Act which sets out a
range of conduct which is authorised for the purposes of subsection
51(1) of the CCA (see item 30). Specifically, item 33 inserts
proposed subsection 151AJ(9) which provides that despite anything
in subsection 151AJ(2) or (3), a person does not engage in
anti-competitive conduct if the conduct is authorised for the
purposes of subsection 51(1) by operation of proposed section
577BA. This is intended to achieve consistency with the
provisions set out in proposed section 577BA and is in
acknowledgment that structural reform of the telecommunications
sector is in the national interest.

Item 34
- Subsection 151BTA(13) (definition of
Telstra )

This item repeals subsection 151BTA(13) as a
result of the amendment proposed under item 32 above.

Item 35 - Section 151BUAAA

Item 35 repeals section 151BUAAA of the
CCA. Section 151BUAAA authorises the Minister to give a
special direction to the ACCC to make rules requiring Telstra to
keep and retain particular records and prepare reports consisting
of information in those records. As a result of the
amendments proposed under Part 1 of the Bill, section 151BUAAA of
the CCA is no longer required. Telstra will have new
record-keeping and reporting requirements under the
functional separation model in proposed Part 9 of Schedule 1, which
will replace Part 8 of Schedule 1(for example, see proposed
paragraph 73(1)(c) and subparagraph 74(d)(ii)).

Item 36 - At the end of Part
XIB

Item 36 adds proposed Division 15 at the end
of Part XIB of the CCA, containing proposed section 151CQ.

Proposed Division 15—Voluntary undertakings given by
Telstra

Proposed
section 151CQ Voluntary undertakings given by
Telstra

Proposed subsection 151CQ(1) provides that
this section applies if an undertaking given by Telstra is in force
under proposed section 577A, 577C or 577E of the Tel Act.

Proposed subsection 151CQ(2) requires the
ACCC, when performing functions or exercising powers under
Part XIB of the CCA, to have regard to relevant conduct that
Telstra is required to engage in, as well as conduct that Telstra
has engaged in, in order to comply with an undertaking in force
under proposed section 577A, 577C, or 577E.

This provision recognises the
inter-relationship between Telstra’s conduct when complying
with an undertaking given by Telstra in force under section 577A,
577C or 577E of the Tel Act and the provisions Telstra is subject
to under the telecommunications industry anti-competitive conduct
and record keeping rules under Part XIB of the CCA.

This provision complements proposed subsection
151AJ(9) (inserted by item 33) which provides that a person does
not engage in anti-competitive conduct for the purposes of Part XIB
if the conduct is authorised for the purposes of subsection 51(1)
by operation of proposed section 577BA.

Item 37
- Section 152AC

Item 38
- At the end of subsection 152AR(4)

Item 38 inserts proposed paragraphs (e) and
(f) in subsection 152AR(4), which is in Part XIC of the
CCA.

The effect of proposed paragraph 152AR(4)(e)
is that the standard access obligation in paragraph 152AR(3)(a)
(which is the requirement to supply an active declared service to a
service provider on request, so that the service provider can
provide carriage and/or content services) does not operate so as to
impose an obligation on Telstra if it would have the effect of
preventing Telstra from complying with a structural separation
undertaking, or an undertaking about hybrid fibre-coaxial networks,
or an undertaking about subscription television broadcasting
licences.

This amendment will mean that Telstra’s
compliance with voluntary undertakings under proposed Part 33 of
the Tel Act cannot be impeded by access seekers requesting access
to services under Part XIC of the CCA. For instance, if
Telstra commits, as part of a structural separation undertaking, to
cease the supply of services in a particular area using certain
fixed-line assets and in accordance with a particular timeframe,
then Telstra’s ability to meet that timeframe will not be
affected by access seekers requesting access to services using
those assets.

Proposed paragraph 152AR(4)(f) provides a
further limitation on the operation of the standard access
obligation in paragraph 152AR(3)(a), as a consequence of the
introduction of the concept of a migration plan under a structural
separation undertaking given by Telstra under proposed
section 577A of the Tel Act. The operation of the
migration plan amendments is described in detail at the explanatory
note for proposed section 577BC, in item 30 above.

The effect of this provision is that, if a
final migration plan is in force, then the standard access
obligation in paragraph 152AR(3)(a) does not operate so as to
impose an obligation on Telstra if it would have the effect of
requiring Telstra to engage in conduct in connection with matters
covered by its migration plan.

The reason for this limitation is to provide
Telstra with a high level of certainty that once its migration plan
has been accepted by the ACCC, the standard access obligations will
not subsequently operate so as to impose additional obligations on
Telstra in relation to matters related to migration.

Item 37 inserts a definition of ‘final
migration plan’ in section 152AC of the CCA, as a result of
the reference to that term in proposed paragraph 152AR(4)(f).
The term is defined to have the same meaning as in the Tel Act (see
proposed section 577BE of that Act, inserted by item 30).

Item 39
- At the end of Part XIC

Item 39 adds proposed section 152ER at the end
of Part XIC of the CCA.

Proposed
section 152ER Voluntary undertakings given by
Telstra

Proposed subsection 152ER(1) provides that
this section applies if an undertaking given by Telstra is in force
under proposed section 577A, 577C or 577E of the Tel Act

Proposed subsection 152ER(2) corresponds to
proposed subsection 151CQ(2) (see item 36), except that it is
expressed to apply for the purposes of Part XIC of the CCA,
rather than Part XIB of the CCA. Effectively, this provision
requires that, when exercising functions or powers under Part XIC
of the CCA, the ACCC would be required to have regard to relevant
conduct that Telstra is required to engage in, as well as conduct
that Telstra has engaged in, in order to comply with an undertaking
in force under proposed section 577A, 577C, or 577E of the Tel
Act.

This provision recognises the
inter-relationship between Telstra’s conduct when complying
with an undertaking given by Telstra in force under sections 577A,
577C or 577E of the Tel Act and the provisions Telstra is subject
to under the telecommunications access regime under Part XIC of the
CCA.

Proposed subsection 151ER(3) would provide
that the ACCC must not perform a function, or exercise a power,
under Part XIC of the CCA so as to prevent Telstra from complying
with an undertaking in force under proposed section 577A, 577C or
577E of the Tel Act.

This provision is intended to clarify that
once the ACCC has accepted an undertaking, it cannot use its powers
under Part XIC of the CCA to prevent Telstra from complying with
the undertaking.

For example, if under a structural separation
undertaking accepted by the ACCC, Telstra had milestones to meet to
cease supplying services in particular areas, the ACCC would be
prevented from using its powers under Part XIC of the CCA in a way
which prevented Telstra from meeting those milestones.

Item 40
- Transitional—continuity of special Telstra
directions

Item 40 is a transitional provision that
confirms that the repeal of section 151BUAAA of the CCA would not
affect the continuity of a special Telstra direction referred to in
that section that was in force immediately before the section was
repealed. This means if a special Telstra direction had been
given prior to the repeal of section 151BUAAA, the ACCC would
still be required to comply with that direction and Telstra would
still be required to comply with any rules made by the ACCC in
accordance with that direction. As a special Telstra direction is
given effect through a Ministerial direction under section 151BUAA,
any special Telstra direction will cease to have effect when action
is taken to revoke the relevant direction given under section
151BUAA.

Division 2—Amendments commencing
immediately after a final functional separation undertaking comes
into force

Division 2 of Part 1 of Schedule 1 of the Bill
contains amendments to the Tel Act and the CCA that are necessary
as a result of the entry into force of a functional separation
undertaking, such as the repeal of Part 8 of Schedule 1 to the Tel
Act, which deals with operational separation and will no longer be
required. In the event that a functional separation does not
come into force (because a structural separation undertaking is
accepted by the ACCC under proposed section 577A), Division 3 would
make many (but not all) of the amendments proposed by Division
2.

Telecommunications Act
1997

Item 41 - Subsection 61(1)

Item 42 - Subsections 61(2), (3) and (4)

These items repeal subsections 61(2), (3) and
(4) and make a consequential amendment to subsection 61(1).
Subsections 61(2), (3) and (4) deal with the Minister’s
ability to declare that current Part 8 of Schedule 1 to the Tel Act
ceases to have effect on a particular day. Part 8 of Schedule
1 will be repealed (see Item 56), therefore the subsections are no
longer required.

Item 43
- Section 61A

This item repeals section 61A. This
section contains provisions requiring before 1 July 2009, the
Minister to cause to be conducted a review of the operation of Part
8 of Schedule 1 to the Tel Act. The Minister caused the review to
be conducted on 7 April 2009 with the release of the National
Broadband Network: Regulatory Reform for 21st Century Broadband
discussion paper.

Item 44
- After subsection 69(6)

This item inserts proposed subsection 69(6A)
into the Tel Act. Proposed subsection 69(6A) confirms
that subsection 69(1) does not apply to a condition set out in Part
9 of Schedule 1 (which deals with the functional separation of
Telstra).

Subsection 69(1) of the Tel Act and its
related provisions under section 69 authorise the ACMA to issue
remedial directions to a carrier that is contravening, or has
contravened, a condition of its carrier licence.

The effect of proposed subsection 69(6A) is
that the ACMA would not be authorised to issue a remedial direction
to Telstra in the event it contravened a condition set out in
proposed Part 9 of Schedule 1. The reason for this restriction is
that it is intended that only the ACCC (and the Minister, where
appropriate) will have authority to take action against Telstra for
breach of a condition set out in Part 9 of Schedule 1.

Item 45 - Subsection 69A(1)

This item omits “Part 8” from
subsection 69A(1) and substitutes “Part 9”. An
alteration to the heading to section 69A is also proposed by
omitting “operational” and substituting
“functional”. Subsection 69A(1) and its related
provisions under section 69A authorise the ACCC to issue
remedial directions to Telstra if Telstra is contravening, or has
contravened a condition set out in Part 8 of Schedule 1. The
effect of the amendments proposed under this item is that the ACCC
would be authorised to issue remedial directions to Telstra if
Telstra is contravening, or has contravened a condition set out in
proposed Part 9 of Schedule 1, which relates to the proposed
functional separation of Telstra. The reference to Part 8 of
Schedule 1 in section 69A will no longer be required given that
Part 8 of Schedule 1 will be repealed under the Bill (see item
56).

Item 46 - Section 69B

This item repeals section 69B. Section 69B
contains provisions allowing Telstra to apply to the Tribunal
seeking a review of a direction relating to operational separation
given to it by the ACCC under section 69A. It is not intended to
enable review by the Tribunal of the exercise of remedial
directions powers in relation to functional separation. Providing
for such review would be contrary to the objective of moving
quickly to implement stronger organisational separation
arrangements for Telstra.

Item 47
- After subsection 70(3)

This item inserts proposed subsection 70(3A)
into the Tel Act. Proposed subsection 70(3A) provides
that subsection 70(1) does not apply to a condition set out in Part
9 of Schedule 1. Subsection 70(1) of the Tel Act authorises
the ACMA to issue formal warnings to carriers that have contravened
a condition of their carrier licence. The effect of proposed
subsection 70(3A) is that the ACMA would not be authorised to issue
a formal warning to Telstra in the event it contravened a condition
set out in proposed Part 9 of Schedule 1. The reason for this
restriction is the same as that outlined in the explanatory note
under item 44 above.

Item 48 - Paragraph 70(5)(ba)

This item omits “Part 8” from
paragraph 70(5)(ba) and substitutes “Part 9”.
Current subsection 70(5) authorises the ACCC to issue a formal
warning to a carrier that contravenes any of the carrier licence
conditions listed under that subsection.

The amendment proposed under this item will
allow the ACCC to issue a formal warning to Telstra if it
contravenes a condition set out in proposed Part 9 of
Schedule 1. The reference to Part 8 is no longer
required given that Part 8 of Schedule 1 will be repealed under the
Bill (see item 56).

Item 49 - Subsection 70(6)

This item repeals subsection 70(6). That
subsection states that paragraph 70(5)(ba) does not limit
subsection 70(1). However, with the proposed insertion of
proposed subsection 70(3A) (see item 47 above), it is now
intended that paragraph 70(5)(ba) (when read together with proposed
subsection 70(3A)) will limit subsection 70(1) so that ACMA would
not be authorised to issue a formal warning to Telstra in the event
it contravened a condition set out in proposed Part 9 of Schedule
1. Therefore it is necessary to repeal subsection 70(6).

Item 50 - Section 104

Item 50 amends section 104, which contains a
simplified outline of Part 5 of the Tel Act. An additional
summary point is proposed to be included in the simplified outline
to reflect the ACCC’s monitoring and reporting obligations
regarding Telstra’s compliance with a final functional
separation undertaking (see item 51, below)

Item 51
- At the end of Part 5

Proposed
section 105B Monitoring of compliance by Telstra
with a final functional separation undertaking

Item 51 inserts proposed section 105B, which
deals with monitoring of compliance by Telstra with a final
functional separation undertaking.

Proposed subsection 105B(1) provides that the
ACCC must monitor Telstra’s compliance with a final
functional separation undertaking and report each financial year to
the Minister on Telstra’s compliance.

Proposed subsection 105B(2) requires the ACCC
to give a report under proposed subsection 105B(1) to the Minister
as soon as practicable after the end of each financial year
concerned.

Proposed subsection 105B(3) requires the
Minister to table a copy of a report under proposed subsection
105B(1) in each House of the Parliament within 15 sitting days of
that House after receiving the report from the ACCC.

Item 52 - After paragraph
564(3)(b)

This item inserts proposed paragraph
564(3)(ba). Under current subsection 564(3) the ACMA is not
entitled to apply for an injunction in relation to a contravention
of a carrier licence condition or service provider rule listed
under that subsection. The proposed paragraphs adds a licence
condition set out in proposed Part 9 of Schedule 1 to the list of
licence conditions and service provider rules in
subsection 564(3). This means the ACMA would not be
entitled to apply for an injunction in relation to a contravention
of a carrier licence condition set out in proposed Part 9 of
Schedule 1.

The reason for this restriction is that it is
intended that only the ACCC (and the Minister) will have authority
to take action against Telstra for breach of a condition set out in
proposed Part 9 of Schedule 1, given that proposed Part 9 of
Schedule 1 contains provisions to address Telstra’s level of
dominance in telecommunications markets and the negative impact
this has had on competition in the telecommunications
industry. It is therefore a matter for which it is
appropriate for the ACCC to be given regulatory
responsibility.

Item 53 - Subsection 564(3) (after
note 2)

This item adds a note to section 564 in
relation to proposed paragraph 564(3)(ba) (under item 52 above) to
assist the reader.

Item 54 - After paragraph
571(3)(b)

This item inserts proposed paragraph
571(3)(ba). Under current subsection 571(3) the ACMA is not
entitled to institute a proceeding for recovery of a pecuniary
penalty in relation to a contravention of a carrier licence
condition or service provider rule listed under that
subsection. The proposed paragraph adds a licence condition
set out in proposed Part 9 of Schedule 1 to the list of
licence conditions and service provider rules in subsection
571(3). This means the ACMA would not be entitled to
institute a proceeding for recovery of a pecuniary penalty in
relation to a contravention of a carrier licence condition set out
in proposed Part 9 of Schedule 1.

The reason for this restriction is that it is
intended that only the ACCC (and the Minister) will have authority
to take action against Telstra for breach of a condition set out in
proposed Part 9 of Schedule 1, given that proposed Part 9 of
Schedule 1 contains provisions to address Telstra’s level of
dominance in telecommunications markets and the negative impact
this has had on competition in the telecommunications
industry. It is therefore a matter for which it is
appropriate for the ACCC to be given regulatory
responsibility.

Item 55
- Subsection 571(3) (after note 2)

This item adds a note to section 571 in
relation to proposed paragraph 564(3)(ba) (under item 54 above) to
assist the reader.

Item 56
- Part 8 of Schedule 1

This item repeals Part 8 of Schedule 1 to the
Tel Act, on the basis that Part 8 (which contains provisions
relating to the operational separation of Telstra) will no longer
be required given the new form of organisational separation that
Telstra will be required to undertake when a final functional
separation undertaking comes into force.

Competition and Consumer Act
2010

Item 57
- Division 14 of Part XIB

Item 57 would repeal Division 14 of Part XIB
of the CCA and substitute a new proposed Division 14,
containing a provision (proposed section 151CP) relating to the
functional separation of Telstra.

Proposed subsection 151CP(1) provides that
section 151CP applies if a final functional separation undertaking
is in force.

Proposed subsection 151CP(2) requires the
ACCC, in performing a function or exercising a power under Part
XIB, to have regard to relevant conduct that Telstra is required to
engage in, as well as relevant conduct that Telstra has engaged in,
in order to comply with a final functional separation undertaking
in force under Part 9 of Schedule 1 to the Tel Act. This
provision recognises the inter-relationship between Telstra’s
conduct when complying with a final separation undertaking under
the Tel Act and the provisions Telstra is subject to under the
telecommunications industry-specific anti-competitive conduct
regime and record keeping rules under Part XIB of the CCA.

Proposed subsection 151CP(3) provides that the
ACCC must not perform a function, or exercise a power under Part
XIB of the CCA so as to prevent Telstra from complying with a final
functional separation undertaking in force under Part 9 of Schedule
1 to the Tel Act.

Proposed subsection 152EPA(1) provides that
the independent telecommunications adjudicator is a company that is
limited by guarantee and is identified in a final functional
separation undertaking as the independent telecommunications
adjudicator for the purpose of proposed section 152EPA.

Proposed subsection 152EPA(2) provides that
the ACCC may assist the independent telecommunications
adjudicator.

It is envisaged that the independent
telecommunications adjudicator would be a non-statutory body
created to assist with establishing the technical parameters and
arrangements for access and the resolution of disputes relating to
access to an access provider’s network and wholesale products
and services. The body would be created in accordance with the
requirements of a final functional separation undertaking.

Proposed subsection 152EPA(3) provides a list
of types of assistance that the ACCC may provide to the independent
telecommunications adjudicator. The list is not intended to
be exhaustive, but illustrative of the types of assistance the ACCC
may provide in accordance with proposed section 152EPA. It
includes the making available of resources and facilities, which is
intended to include accommodation, and the provision of
information.

Proposed section 152EQ refers to conduct
Telstra is required to engage in, or actual conduct engaged
in by Telstra in complying with a final functional separation
undertaking and is identical to proposed subsection 152CP
(discussed above), except that it is expressed to apply for the
purposes of Part XIC of the CCA, rather than Part XIB of the
CCA.

This provision recognises the
inter-relationship between Telstra’s conduct when complying
with a final functional separation undertaking under the Tel Act
and the provisions Telstra is subject to under the
telecommunications industry anti-competitive conduct and record
keeping rules under Part XIC of the CCA.

Proposed section 152EQ will replace the
current section 152EQ, which contains similar provisions but refers
to Telstra’s final operational separation plan in force under
Part 8 of Schedule 1 to the Tel Act, which will cease to have
effect once a final functional separation undertaking comes into
force under proposed Part 9 of Schedule 1 to the Tel Act.

Division
3—Amendments commencing immediately after an undertaking
about structural separation comes into force

As noted above, Division 2 of Part 1 of
Schedule 1 to the Bill contains amendments to the Tel Act and the
CCA that are necessary as a result of the entry into force of a
functional separation undertaking under proposed Part 9 of Schedule
1 to the Tel Act, such as the repeal of Part 8 of Schedule 1 to
that Act, which deals with operational separation and will no
longer be required. Given that a functional separation
undertaking may not come into force if the ACCC accepts an
undertaking given by Telstra under proposed section 577A of the Tel
Act (relating to structural separation, see item 30), Division 3 of
Part 1 of Schedule 1 to the Bill makes changes to the CCA and the
Tel Act in the event that a structural separation undertaking, not
a functional separation undertaking, comes into force.

The amendments made by Division 3 are also
included in Division 2. However, some amendments that would
be made by Division 2 are only relevant in a situation where there
is in force a functional separation undertaking (not a structural
separation undertaking). For this reason, not all of the
amendments in Division 2 are included in Division 3.

Telecommunications Act 1997

Item 60 - Subsection 61(1)

Item 61 - Subsections 61(2), (3) and
(4)

These items repeal subsections 61(2), (3) and
(4) and make a consequential amendment to
subsection 61(1). Subsections (2), (3) and (4) deal with
the Minister’s ability to declare that current Part 8 of
Schedule 1 relating to operational separation ceases to have effect
on a particular day. Part 8 of Schedule 1 is repealed by item
65, therefore the subsections are no longer required.

Item 62 - Sections 61A, 69A and
69B

This item repeals sections 61A, 69A and
69B.

Section 61A contains provisions requiring
before 1 July 2009, the Minister to cause to be conducted a review
of the operation of Part 8 of Schedule 1. The Minister caused the
review to be conducted on 7 April 2009 with the release of the
National Broadband Network: Regulatory Reform for 21st Century
Broadband discussion paper.

Section 69A authorises the ACCC to issue
remedial directions to Telstra, if Telstra is contravening, or has
contravened a condition set out in Part 8 of Schedule 1. That
section is no longer required given Part 8 of Schedule 1 will be
repealed (see item 65).

Section 69B contains provisions allowing
Telstra to apply to the Tribunal seeking a review of a direction
given to it by the ACCC under section 69A. That section is no
longer required, given the repeal of section 69A.

Item 63
- Paragraph 70(5)(ba)

This item repeals paragraph 70(5)(ba), which
authorises the ACCC to issue a formal warning to a carrier that
contravenes a carrier licence condition set out in Part 8 of
Schedule 1. That paragraph is no longer required, given the
repeal of Part 8 of Schedule 1 (see item 65).

Item 64
- Subsection 70(6)

This item repeals subsection 70(6), which is a
provision regarding the operation of paragraph 70(5)(ba). The
provision is no longer required, given the amendment proposed under
item 63 above.

Item 65 - Part 8 of Schedule
1

This item repeals Part 8 of Schedule 1, on the
basis that this Part (which contains provisions relating to the
operational separation of Telstra) will no longer be required given
the new form of organisational separation that Telstra will be
required to undertake when a structural separation undertaking
comes into force.

Competition and Consumer Act
2010

Item 66 - Division 14 of Part
XIB

This item repeals Division 14 of Part XIB of
the CCA. Division 14 contains provisions relating to the
operational separation of Telstra under Part 8 of Schedule 1 to the
Tel Act. Those provisions are no longer required given that
Part 8 of Schedule 1 is repealed by item 65.

Item 67
- Section 152EQ

Item 67 would repeal section 152EQ of the CCA
and insert in its place, a replacement section 152EQ containing
provisions which permit the ACCC to provide assistance to an
independent telecommunications adjudicator if Telstra provides for
it in its structural separation undertaking.

Proposed section 152EQ mirrors proposed
section 152EPA. The provisions regarding the independent
telecommunications adjudicator in proposed section 152EPA are
to apply in the event a final functional separation undertaking
comes into force. This amendment is proposed so as to
allow for identical provisions in the event a structural separation
undertaking under proposed section 577A comes into force, thereby
providing Telstra with the option of allowing for the existence of
an independent telecommunications adjudicator in a draft structural
separation undertaking.

Part
2—Telecommunications access regime

Part 2 of Schedule 1 to the Bill makes a
number of amendments to the telecommunications access regime in
Part XIC of the CCA. Necessary consequential amendments are
also made to the Tel Act and the NTN Sale Act.

Division 1—Amendments

Division 1 of Part 2 of Schedule 1 to the Bill
contains proposed amendments to the telecommunications access
regime under Part XIC of the CCA, and associated amendments to
other Acts.

Part 3 of the NTN Sale Act applies an access
regime, based on the telecommunications access regime in Part XIC
of the CCA, to:

·
certain carriage services supplied by a National Transmission
Company (being a company to which assets or liabilities are
transferred under the provisions of the NTN Sale Act) or declared
successor; and

·
the provision of access to sites and towers by a National
Transmission Company or declared successor;

in favour of certain nominated customers (for
example, the ABC, the SBS and Radio for the Print Handicapped).

Part 2 of Schedule 1 of the Bill makes a
number of changes to Part XIC of the CCA, including replacing the
negotiate/arbitrate model with a power for the ACCC to set
up front the terms and conditions of access to declared
services in access determinations. The amendments to the
structure and operation of Part XIC of the CCA by Part 2
of Schedule 1 of the Bill will not apply to the
telecommunications access regime insofar as it is adopted by Part 3
of the NTN Sale Act. The effect of items 68 and 69 is that
Part XIC of the CCA as it operated before the commencement of
those items will continue to apply as the telecommunications access
regime that is adopted by Part 3 of the NTN Sale Act.

From 1 January 2011 the short title of the
Trade Practices Act 1974 will change to the Competition
and Consumer Act 2010 as a result of the Trade Practices
Amendment (Australian Consumer Law) Act (No. 2) 2010 . The
commencement provision for the Bill (described at clause 2) will
ensure that the references in the Bill (including in items 68 and
69) to the CCA will be effective in making amendments to that Act,
by deferring their commencement until the change of name of that
Act takes effect.

Item 68 of the Bill amends the definition of
‘telecommunications access regime’ in section 3 of the
NTN Sale Act. Currently that term is defined to mean
Part XIC of the CCA (paragraph (a) of the definition), any
other provision of the CCA that relates to Part XIC (paragraph
(b)), certain sections and Parts of the Tel Act (paragraph(c)), and
any other provisions that relate to those sections and Parts of the
Tel Act (paragraph (d)).

Item 68 amends paragraphs (a) and (b) of this
definition to provide that the reference to Part XIC of the CCA in
the definition of ‘telecommunications access regime’
means Part XIC of the CCA as in force immediately before the
commencement of Division 1 of Part 2 of Schedule 1 of the Bill.

Item 69 - At the end of section
16

Section 16 of the NTN Sale Act provides that
certain provisions of the CCA do not apply to the
telecommunications access regime in Part 3 of that Act. Item
69 amends section 16 to provide that a reference to the CCA in that
section is a reference to that Act as in force immediately before
the commencement of Division 1 of Part 2 of Schedule 2 of the
Bill.

Telecommunications Act
1997

Item 70
- After section 62

Included in the proposed amendments made by
Part 2 of Schedule 1 of the Bill to Part XIC of the CCA are
additional carrier licence conditions and service provider rules,
which are specific to the telecommunications access regime and are
therefore to be located in Part XIC of the CCA.

Items 70 through to item 92 contain proposed
consequential amendments to the Tel Act to accommodate the
additional carrier licence conditions and service provider rules
that are proposed to be inserted into Part XIC of the CCA.

Item 70 inserts proposed sections 62A, 62B and
62C into the Tel Act.

Proposed
section 62A Condition of carrier licence set out
in section 152BCO of the Competition and Consumer Act
2010

Proposed
section 62B Condition of carrier licence set out
in section 152BDF of the Competition and Consumer Act
2010

Proposed
section 62C Condition of carrier licence set out
in section 152BEC of the Competition and Consumer Act
2010

Proposed sections 62A, 62B and 62C of the Tel
Act provide that a carrier licence is subject to the conditions set
out in proposed sections 152BCO, 152BDF and 152BEC of the CCA,
respectively. These provisions are inserted as part of
the proposed Division 4 of Part XIC of the CCA that is inserted by
item 160.

Proposed sections 152BCO and 152BDF of the CCA
set out carrier licence conditions requiring a carrier to comply
with any access determinations applicable to it, and any binding
rules of conduct applicable to it. Proposed section 152BEC
sets out carrier licence conditions requiring a carrier to comply
with proposed sections 152BEA and 152BEB of the CCA which relate to
the lodgment of access agreements with the ACCC and the
notification to the ACCC of the termination of access
agreements.

The effect of proposed sections 62A and 62B of
the Tel Act, together with proposed sections 152CO and 152BDF of
the CCA, is that a carrier must comply with an access determination
and with binding rules of conduct, and that failure to do so would
render the carrier subject to the enforcement provisions in the Tel
Act relating to breach of carrier licence conditions.
Equally, the effect of proposed section 62C of the Tel Act is that
failure by a carrier to comply with proposed sections 152BEA and
152BEB would render the carrier subject to those enforcement
provisions.

Item 71 - Subsection 69(6)

Item 72 - Subsection 69(6)
(note)

Item 71 amends subsection 69(6).

Under subsection 69(1) of the Tel Act, the
ACMA may give the carrier a written direction requiring the carrier
to take specified action directed towards ensuring that the carrier
does not contravene the condition, or is unlikely to contravene the
condition, in the future.

Parts 3 and 5 of Schedule 1 to the Tel Act
make it a condition of a carrier’s licence that the carrier
must allow other carriers to access certain of their
telecommunications facilities for certain purposes. The Bill
makes a number of changes to those Parts of Schedule 1, including
changes to provide that it is the ACCC, not the ACMA, that will
have the role of enforcing compliance with those licence
conditions. This change to enforcement is consequential to
changes to the administration of the Parts. It is more
appropriate that the facilities access regime in Parts 3 and 5 of
Schedule 1 should be administered in its entirety by the ACCC, as
the ACCC is the national competition regulator and also administers
the national access regime in Part IIIA of the CCA and the
telecommunications access regime in Part XIC of the CCA. In
addition, the transfer of administrative functions previously
exercised by the ACMA under Parts 3 and 5 to the ACCC will
streamline the operation of the Parts.

Already, under section 69 of the Tel Act, the
ACMA is prevented from issuing remedial directions to a carrier in
relation to Parts 3 and 4 of Schedule 1 to the Tel Act. Item
71 modifies subsection 69(6) by including a reference to Part 5 of
Schedule 1. The result of this amendment is that the
ACMA will no longer have the ability to issue remedial directions
to carrier licence conditions for breaches of licence conditions
included in Part 5 of Schedule 1 to the Tel Act.

Item 72 makes a
modification to the note accompanying subsection 69(6), as a
consequence of the change made by item 71.

Item 73
- After subsection 69(7)

Item 73 inserts proposed subsections 69(7A),
(7B) and (7C) into the Tel Act. The effect of these new
provisions is that subsection 69(1) does not apply to the carrier
licence conditions set out in proposed section 152BCO, 152BDF or
152BEC of the CCA. Subsection 69(1) of the Tel Act and
related provisions under section 69 authorise the ACMA to issue a
remedial direction to a carrier that is contravening, or has
contravened, a condition of its carrier licence. The effect
of proposed subsections 69(7A), (7B) and (7C) is that the ACMA
would not be authorised to issue a remedial direction to a carrier
that is contravening or has contravened a licence condition under
proposed sections 152BCO, 152BDF or 152BEC of the CCA. The
reason for this restriction is that it is intended that only the
ACCC and the Minister will have authority to take action against a
carrier for breach of a licence condition under proposed sections
152BCO, 152BDF or 152BEC of the CCA. The identified licence
conditions are specific to the telecommunications access regime
under Part XIC of the CCA, for which the ACCC has regulatory
responsibility. It is therefore appropriate that the ACCC,
and not the ACMA, will have powers to take action against carriers
for breach of those licence conditions.

Proposed section 69AA confers upon the ACCC
the power to issue remedial directions to a carrier that has
contravened, or is contravening, a carrier licence condition set
out in Parts 3, 4 or 5 of Schedule 1.

Proposed subsection 69AA(2) will enable the
ACCC to direct the carrier, in writing, to take specified action
directed towards ensuring that the carrier does not contravene the
condition, or is unlikely to contravene the condition, in the
future. Proposed subsection 69(4) provides that a carrier must not
contravene a direction given by the ACCC under proposed subsection
69AA(2).

Proposed subsection 69AA(3) lists examples of
the kinds of directions that the ACCC may give to a carrier. The
list is not exhaustive, and is not intended to limit the kinds of
directions that could be given.

Proposed subsection 69AA(5) clarifies that a
remedial direction given by the ACCC is not a legislative
instrument. This is included for the avoidance of doubt. Similar
provisions already exist at subsections 69(8) and 69A(5) of the Tel
Act.

Item 75
- Subsection 70(3)

Item 76
- Subsection 70(3) (note)

Section 70 of the Tel Act confers a general
power on the ACMA to issue a formal warning if a carrier
contravenes a condition of its carrier licence. This ACMA
power does not currently apply to a condition set out in Part 3 or
4 of Schedule 1 to the Tel Act (refer subsection 70(3)). Item
75 amends subsection 70(3) to include a reference to Part 5 of that
Schedule. The result of this change is that the ACMA will no
longer have power to issue formal warnings to carriers for breaches
of licence conditions set out in Part 5 of Schedule 1 to the Tel
Act.

The reason for this further restriction is the
same as that outlined in the explanatory note under item 71 above;
that is, responsibility for administration of these parts being
transferred to the ACCC.

Item 76 makes a modification to the note
accompanying subsection 70(3) following the change by item 75.

Item 77 - After subsection
70(4)

Item 77 inserts proposed subsections 70(4A),
(4B) and (4C) into the Tel Act. The effect of these
provisions is that subsection 70(1) does not apply to the
conditions set out in proposed sections 152BCO, 152BDF and 152BEC
of the CCA. Subsection 70(1) of the Tel Act authorises
the ACMA to issue formal warnings to carriers that contravene a
condition of their carrier licence. The effect of proposed
subsections 70(4A), (4B) and (4C) is that the ACMA would not be
authorised to issue a formal warning to a carrier that has
contravened a carrier licence condition set out in proposed
sections 152BCO, 152BDF or 152BEC of the CCA. The reason for
this restriction is the same as that outlined in the explanatory
note under item 73 above.

Item 78 - Paragraph 70(5)(b)

This item amends paragraph 70(5)(b) of the Tel
Act, which confers power on the ACCC to issue a formal warning if a
carrier contravenes a condition set out in Part 3 or 4 of Schedule
1 to the Tel Act.

As explained in the explanatory note to item
71, the enforcement of Part 5 of Schedule 1 to the Tel Act is
proposed to be transferred from the ACMA to the ACCC. As a
consequence of this proposal, item 78 amends paragraph 70(5)(b) to
include a reference to Part 5 of Schedule 1. This amendment
will ensure that the ACCC has the power to issue formal warnings to
carriers for breaches of conditions under Part 5 also.

Item 79
- At the end of subsection 70(5)

This item inserts proposed paragraphs
70(5)(d), (e) and (f) into the Tel Act. The proposed
paragraphs have the effect of adding the conditions set out in
proposed sections 152BCO, 152BDF and 152BEC of the CCA as licence
conditions for which the ACCC may issue formal warnings to a
carrier under subsection 70(5), where that carrier contravenes a
licence condition. As the conditions to be included by
proposed sections 152BCO, 152BDF and 152BEC are specific to the
telecommunications access regime under section Part XIC of the
CCA, it is appropriate that the ACCC be given a formal warning
power under subsection 70(5) in relation to those licence
conditions.

Item 80
- At the end of section 98

This item inserts proposed subsections 98(3),
(4) and (5) into the Tel Act. The proposed subsections
indicate that the rules set out in proposed
subsections 152BCP(2), 152BDG(2) and 152BED(2) of the CCA are
to be included as service provider rules for the purposes of the
Tel Act and its regulations. Proposed sections 152BCP, 152BDG
and 152BED are inserted into proposed Division 4 of Part XIC of the
CCA by item 160. The rules in these proposed provisions
mirror the conditions set out in proposed sections 152BCO, 152BDF
and 152BEC of the CCA. They require service providers to
comply with access determinations and binding rules of conduct that
are applicable, and require service providers to comply with
proposed sections 152BEA and 152BEB of the CCA which relate to the
lodgment of access agreements with the ACCC and the notification to
the ACCC of the termination of access agreements.

Under subsection 101(1) of the Tel Act a
service provider must comply with all service provider rules that
apply to that service provider. Subsection 101(1) is also a
civil penalty provision. Proposed subsections 98(3), (4) and
(5) have the effect of making the rules set out in proposed
subsections 152BCP(2), 152BDG(2) and 152BED(2) of the CCA subject
to the civil penalty provisions under the Tel Act and other
provisions under the Tel Act dealing with service provider rules,
including provisions relating to enforcement.

Item 81 - After subsection
102(6)

This item inserts proposed subsections
102(6A), (6B) and (6C) into the Tel Act. These provisions
indicate that subsection 102(1) does not apply to the rules set out
in proposed subsections 152BCP(2), 152BDG(2) and 152BED(2) of the
CCA. Subsection 102(1) of the Tel Act and related provisions
under section 102 authorise the ACMA to issue a remedial direction
to a service provider that is contravening, or has contravened, a
service provider rule. The effect of proposed subsections
102(6A), (6B) and (6C) is that the ACMA would not be authorised to
issue a remedial direction to a service provider that is
contravening or has contravened a service provider rule under
proposed subsections 152BCP(2), 152BDG(2) or 152BED(2) of the
CCA. The reason for this restriction is that it is intended
that only the ACCC and the Minister will have authority to take
action against a service provider for breach of a service provider
rule under proposed subsections 152BCP(2), 152BDG(2) or 152BED(2)
of the CCA. The identified service provider rules are
specific to the telecommunications access regime under
Part XIC of the CCA, for which the ACCC has regulatory
responsibility. It is therefore appropriate that only the
ACCC will have powers to take action against service providers for
breach of those service provider rules.

Item 82
- After subsection 103(3)

This item inserts proposed subsections
103(3A), (3B) and (3C) into the Tel Act. These provisions
indicate that subsection 103(1) does not apply to the rules set out
in proposed subsections 152BCP(2), 152BDG(2) and 152BED(2) of the
CCA. Subsection 103(1) of the Tel Act authorises the ACMA to
issue a formal warning to a person that breaches a service provider
rule. The effect of proposed subsections 103(3A), (3B)
and (3C) is that the ACMA would not be authorised to issue a formal
warning to a person that breaches a service provider rule set out
in proposed subsections 152BCP(2), 152BDG(2) or 152BED(2) of the
CCA. The reason for this restriction is the same as that
outlined in the explanatory note under item 81 above.

Item 83 - After subsection
103(4)

This item inserts proposed subsections
103(4A), (4B) and (4C) into the Tel Act. The proposed
subsections have the effect of adding the rules set out in proposed
subsections 152BCP(2), 152BDG(2) and 152BED(2) as service provider
rules for which the ACCC may issue a formal warning to a service
provider under section 103, where that service provider has
contravened a service provider rule. As the rules set out
under proposed subsections 152BCP(2), 152BDG(2) and 152BED(2) are
specific to the telecommunications access regime under section Part
XIC of the CCA, it is appropriate that the ACCC be given a formal
warning power under subsections 103(4A), (4B) and (4C) in
relation to those service provider rules.

Item 84 - After section 505

This item inserts proposed sections 505A and
505B into Part 25 of the Tel Act, which relates to public
inquiries.

Proposed
section 505A ACCC may use material presented to a
previous public inquiry

To ensure the ACCC is able to conduct
inquiries in the most efficient manner, without unduly expending
time or resources on repetitive processes, proposed
section 505A provides that, where the ACCC obtains evidence,
material, written submissions or other information for the purposes
of an inquiry under Part 25 of the Tel Act, it may also use that
evidence, material, those written submissions or that other
information for the purposes of a later inquiry under Part 25.

This provision is intended to allow the ACCC
to use information, material, evidence or submissions that it
obtains in one inquiry for the purposes of another inquiry, which
will allow the ACCC to expedite the inquiry process and to consider
matters that arose in earlier inquiries and that continue to be
relevant to a subsequent inquiry. For instance, where
evidence or material is presented as part of an inquiry about a
proposal to declare a specified eligible service to be a declared
service (see section 152AL of the CCA), this provision will
permit the ACCC to use that evidence or material in an inquiry
about a proposal to make an access determination in relation to
that service (see proposed section 152BCH), or in a later inquiry
about a proposal to vary the declaration of the service (see
section 152AO) or to vary the access determination (see proposed
section 152BCN).

Proposed subsection 505A(3) provides that
proposed section 505A is not intended to limit, by implication, the
information that the ACCC may use for the purposes of a public
inquiry under Part 25 of the Tel Act.

Proposed
section 505B ACCC may adopt a finding from a
previous public inquiry

When it holds an inquiry under Part 25 of the
Tel Act, the ACCC is required to prepare a report setting out its
findings as a result of the inquiry (see section 505 of the Tel
Act). The effect of proposed section 505B is that the ACCC
can adopt the findings it makes in a report on one public inquiry
under Part 25 for the purposes of another public inquiry under Part
25. For instance, where the ACCC makes a finding as a result
of an inquiry about a proposal to declare a specified eligible
service to be a declared service (see section 152AL of the
CCA), this provision will permit the ACCC to adopt that finding in
a later inquiry about a proposal to make an access determination in
relation to that service (see proposed section 152BCH), or in a
later inquiry about a proposal to vary the declaration of the
service (see section 152AO) or to vary the access
determination (see proposed section 152BCN).

Proposed section 505B is intended to improve
the efficiency and cost-effectiveness of the public inquiry process
and facilitate quicker regulatory outcomes by enabling the ACCC to
avoid having to unnecessarily repeat processes.

Item 85 - Paragraph 564(3)(b)

This item amends paragraph 564(3)(b) of the
Tel Act.

Paragraph 564(3)(b) of the Tel Act imposes a
limitation on the ACMA, by providing that it is not entitled to
apply for an injunction in relation to a contravention of a carrier
licence condition set out in Part 3 or 4 of Schedule 1 to that
Act.

As explained in the explanatory note to item
71, the enforcement of Part 5 of Schedule 1 is proposed to be
transferred from the ACMA to the ACCC. As a consequence of this
proposal, item 85 amends paragraph 564(3)(b) to include a reference
to Part 5 of Schedule 1.

Item 86 - At the end of subsection
564(3) (before the notes)

Item 87 - Subsection 564(3) (note
2)

Item 88 - At the end of subsection
564(3) (after the notes)

Item 86 inserts proposed paragraphs
564(3)(f)-(k). Section 564 of the Tel Act permits the
Minister, the ACMA or the ACCC to apply to the Federal Court for an
injunction concerning a person’s contravention of the Tel
Act. Under current subsection 564(3) the ACMA is not entitled
to apply for an injunction in relation to a contravention of
certain carrier licence conditions and service provider rules that
are listed under that subsection. The proposed paragraphs add
the licence conditions in sections 152BCO, 152BDF and 152BEC of the
CCA and the service provider rules in subsections 152BCP(2),
152BDG(2) and 152BED(2) of the CCA to the list of licence
conditions and service provider rules in
subsection 564(3). This means the ACMA would not be
entitled to apply for an injunction in relation to a contravention
of a carrier licence condition in proposed sections 152BCO, 152BDF
or 152BEC of the CCA or a service provider rule in proposed
subsections 152BCP(2), 152BDG(2) or 152BED(2) of the CCA. The
Minister and the ACCC would, however, be entitled to apply for an
injunction in relation to a contravention of these carrier licence
conditions and service provider rules. The reason for this
restriction is outlined in the explanatory notes under items 73 and
81 above.

Items 87 and 88 add notes to section 564 in
relation to proposed paragraphs 564(3)(f)-(k) to assist
the reader.

Item 89 - Paragraph 571(3)(b)

This item amends paragraph 571(3)(b) of the
Tel Act.

Paragraph 571(3)(b) of the Tel Act imposes a
limitation on the ACMA, by providing that it is not entitled to
institute proceedings for the recovery of a pecuniary penalty in
relation to a contravention of a carrier licence condition set out
in Part 3 or 4 of Schedule 1.

As explained in the explanatory note to item
71, the enforcement of Part 5 of Schedule 1 is proposed to be
transferred from the ACMA to the ACCC. As a consequence of
this proposal, item 89 amends paragraph 571(3)(b) to include a
reference to Part 5 of Schedule 1.

Item 90 - At the end of subsection
571(3) (before the notes)

Item 91 - Subsection 571(3) (note
2)

Item 92 - At the end of subsection
571(3) (after the notes)

This item inserts paragraphs
571(3)(f)-(k). Section 571 of the Tel Act permits the
Minister, the ACMA or the ACCC to institute proceedings in the
Federal Court for the recovery on behalf of the Commonwealth of a
pecuniary penalty for breach of a civil penalty provision.
Under current subsection 571(3) the ACMA is not entitled to
institute a proceeding for recovery of a pecuniary penalty in
relation to a contravention of a carrier licence condition or
service provider rule listed under that subsection. The
proposed paragraphs add the licence conditions in proposed
sections 152BCO, 152BDF and 152BEC of the CCA and the service
provider rules in proposed subsections 152BCP(2), 152BDG(2) and
152BED(2) of the CCA to the list of licence conditions and service
provider rules in subsection 571(3). This means the ACMA
would not be entitled to institute a proceeding for recovery of a
pecuniary penalty in relation to a contravention of a carrier
licence condition in proposed sections 152BCO, 152BDF or 152BEC of
the CCA or a service provider rule in proposed subsections
152BCP(2), 152BDG(2) or 152BED(2) of the CCA. The reason for
this restriction is outlined in the explanatory notes under items
73 and 81 above.

Items 91 and 92 adds notes to section 571 in
relation to proposed paragraphs 571(3)(b) and (f)-(k) to
assist the reader.

Item 93 - After subclause 17(2) of
Schedule 1

Item 93 inserts proposed subclause 17(2A) in
Schedule 1 of the Tel Act. Subclause 17(1) of
Schedule 1 sets out the general rule that carriers must provide
other carriers with access to supplementary facilities for the
purpose of enabling the other carriers to provide competitive
facilities and competitive carriage services or to establish their
own facilities.

Proposed subclause 17(2A) provides limitations
on a carrier’s obligation to comply with the rule in
subclause 17(1).

The effect of proposed paragraph 17(2A)(a) is
to provide some protection to parties that have rights under
contracts at a time a carrier makes a request for access to another
carrier’s facilities, where those rights would be affected by
the requirement to give access in accordance with the
request. Proposed subclause 17(2B) provides that, where a
contract has been signed but provisions of that contract have not
yet entered into force because a condition precedent has not been
satisfied, and if those provisions entered into force then a right
would exist, then proposed paragraph 17(2A)(a) has effect as if the
contract was in force and the person had the right under the
contract, if it remains possible that the condition precedent could
be satisfied. This provision will ensure that appropriate
preference is given to contracts that have been executed but that
have not yet entered into force, for so long as it remains a
possibility that the contract will enter into force. For
example, if a contract would afford a person a right on the
satisfaction under a provision that is subject to a condition
precedent, and the condition precedent requires the condition
precedent to be satisfied within six months of execution, then if
after six months the condition has not been satisfied, from that
time the contract would not be treated as being in force and the
person would not be treated as having a right.

Proposed paragraphs 17(2A)(b) and (c) are
included as a result of proposed amendments to the Tel Act in Part
1 of Schedule 1 to the Bill, and reflect the amendments to section
152AR of the CCA made by item 38 (described in the notes for that
item, above). These amendments to clause 17 are designed to
ensure that the facilities access regime in Part 3 of Schedule 1
does not operate in a manner that frustrates the achievement of
structural reform of the telecommunications industry.

The effect of proposed paragraph 17(2A)(b) is
that the rule in subclause 17(1) does not operate so as to impose
an obligation on Telstra to the extent that it would have the
effect of preventing Telstra from complying with a structural
separation undertaking, or an undertaking about hybrid
fibre-coaxial networks or an undertaking about subscription
television broadcasting licences.

This amendment will mean that Telstra’s
compliance with voluntary undertakings under proposed Part 33 of
the Tel Act cannot be impeded by access seekers requesting access
to services under Part XIC of the CCA.

Proposed paragraph 17(2A)(c) provides a
further limitation on the operation of the rule in subclause 17(1),
as a consequence of the introduction of the concept of a migration
plan under a structural separation undertaking given by Telstra
under proposed section 577A of the Tel Act. The
operation of the migration plan amendments is described in detail
at the explanatory note for proposed section 577BC, in item 30
above.

The effect of this provision is that, if a
final migration plan is in force, then the rule in subclause 17(1)
does not operate so as to impose an obligation on Telstra if it
would have the effect of requiring Telstra to engage in conduct in
connection with matters covered by its migration plan.

The reason for this limitation is to provide
Telstra with a high level of certainty that once its migration plan
has been accepted by the ACCC, the carrier licence condition
relating to access to supplementary facilities will not
subsequently operate so as to impose additional obligations on
Telstra in relation to matters related to migration.

Item 94 - After subclause 17(4) of
Schedule 1

Item 95 - At the end of clause 17 of
Schedule 1

Item 94 inserts new subclause 17(4A) into
Schedule 1 to the Tel Act.

The facilities access obligation under
subclause 17(1) applies to owners and operators of the
supplementary facilities.

Proposed subclause 17(4A) clarifies that for
the purposes of subclause 17(1), if there is an agreement between
Telstra and an NBN corporation that relates to the NBN
corporation’s access to facilities owned or operated by
Telstra, and apart from this provision the effect of the agreement
would be that the NBN corporation would be considered to be the
operator of the facility, then the NBN corporation is taken not to
be subject to operator of the facilities.

This will ensure that, as part of any
structural separation undertaking submitted by Telstra in
accordance with proposed section 577BA of the Tel Act, NBN Co and
Telstra can enter into agreements for the provision of access to
Telstra facilities without NBN Co then being considered to be the
operator of the facilities (and therefore being obliged to provide
access to those facilities to other carriers on request, in
accordance with subclause 17(1)).

This proposed subclause clarifies that a third
party cannot seek access to a facility from an NBN corporation
merely because there is an agreement in force between an NBN
corporation and Telstra which relates to an NBN corporation’s
access to facilities owned and operated by Telstra. This proposed
provision is included to provide Telstra with a high degree of
certainty about control of its facilities.

Item 95 inserts a new subclause 17(6) of
Schedule 1 to the Tel Act, which provides that the term ‘NBN
corporation’ (used in proposed subclause 17(4A)) has the same
meaning as in proposed section 577BA.

Item 96
- At the end of clause 18 of Schedule 1

Item 96 inserts new subclauses 18(6) and
(7).

Subclause 18(1) of Schedule 1 to the Tel Act
provides that the terms and conditions on which a carrier complies
with the supplementary facilities access obligation under clause 17
are as agreed between a carrier and a requesting carrier, or, where
agreement cannot be reached, determined by an arbitrator appointed
by the parties. Where the parties cannot agree on an arbitrator,
the ACCC is to be the arbitrator.

In light of the new arrangements for the
structural separation of Telstra, it is not appropriate for an
arbitrator (including the ACCC) to make an arbitration
determination which would prevent Telstra from complying with its
structural separation undertaking, or undertakings about hybrid
fibre-coaxial networks or about subscription television
broadcasting licences. Accordingly, proposed subclause 18(6)
provides that an arbitrator must not make a determination under
clause 18 if the determination would have the effect of preventing
Telstra from complying with an undertaking in force under proposed
sections 577A, 577C or 577E.

Proposed subclause 18(7) provides a
determination under clause 18 will have not have any effect to the
extent to which it is inconsistent with a written agreement that is
in force between parties about the terms and conditions on which
access is to be provided in accordance with clause 17. The
effect of this is the arbitrator (including the ACCC as default
arbitrator) will not be permitted to make a determination about the
terms and conditions of access (including price-related terms)
which is inconsistent with an existing agreement between two
carriers. If carriers reach agreement as to the terms and
conditions on which access is to be provided, then they will not be
able to seek an arbitration, except that they may seek an
arbitration about terms and conditions for any matters that are not
addressed by their agreement (since in that case there will be no
inconsistency between the agreement and the arbitration
determination).

Item 97 - Clause 31 of Schedule
1

Item 97 amends clause 31 of Schedule 1 to the
Tel Act, by including a definition of the term ‘NBN
corporation’ (used in proposed subclauses 33(8), 34(8) and
35(8)). The term has the same meaning as in proposed section
577BA.

Item 98 - Subclause 33(3)
of Schedule 1

Subclause 33(1) sets out a general rule which
requires the first carrier, if requested to do so by another
carrier (the second carrier), to give access to a
telecommunications transmission tower owned or operated by the
first carrier.

Subclause 33(3) provides that the first
carrier is not required to give access if the ACMA has provided a
written certificate stating that compliance with the access
obligation under clause 33 is not technically feasible.

In order to streamline the regulation of the
facilities access regime under Part 5 of Schedule 1 to the Tel Act
and harmonise it with that under the CCA, it is proposed that the
ACCC, rather than the ACMA, will act as the primary regulator.
Accordingly, as a result of item 98, it will be for the ACCC, not
the ACMA, to provide written certificates concerning technical
feasibility in accordance with subclause 33(3), to reflect this
change in responsibility for the regulation of Part 5.

Item 99 - Subclause 33(4)
of Schedule 1

Subclause 33(4) sets out the matters the ACMA
must have regard to in determining whether compliance with
subclause 33(4) in relation to a tower is technically feasible.

The primary regulator for Part 5 is to change
from the ACMA to the ACCC. As a consequence, item 99 amends
subclause 33(4) by replacing all references to the
‘ACMA’ in subclause 33(4) with the ‘ACCC’.
No other substantive changes are made to subclause 33(4).

Item 100 - After subclause 33(4) of
Schedule 1

Notwithstanding the change in entities
responsible for the regulation of Part 5, given the ACMA’s
technical expertise in this area, there is value in the ACCC
consulting with the ACMA as part of its deliberations on whether to
issue a written certificate about technical feasibility.

Item 100 inserts proposed subclause 33(4A),
which provides that the ACCC may consult with the ACMA before
issuing a certificate under subclause 33(3). Consultation with the
ACMA is not mandatory, although it is envisaged that it will occur
as appropriate.

Item 101 -
Subclause 33(5) of Schedule 1

Item 101 amends subclause 33(5) by replacing
all references to the ‘ACMA’ with the
‘ACCC’. This represents a consequential amendment
stemming from the change in entities responsible for regulating
Part 5. The effect of item 101 would be that the ACCC, rather
than the ACMA, would be responsible for issuing written
certificates under subclause 33(3) regarding technical
feasibility.

Item 102 - At the end of clause 33 of
Schedule 1

Item 102 inserts proposed subclauses 33(6),
(7) and (8).

Subclause 33(1) sets out a general rule which
requires the first carrier, if requested to do so by another
carrier (the second carrier), to give access to a
telecommunications transmission tower owned or operated by the
first carrier.

Proposed subclause 33(8) clarifies that for
the purposes of subclause 33(1), if there is an agreement between
Telstra and an NBN corporation that relates to the NBN
corporation’s access to a telecommunications transmission
tower owned or operated by Telstra, and apart from this provision
the effect of the agreement would be that the NBN corporation would
be considered to be the operator of the tower, then the NBN
corporation is taken not to be the operator of the tower. The
reason for this is as explained in the note in relation to proposed
subclause 17(4A), see item 94, above.

Item 103 - Subclause 34(3) of
Schedule 1

Item 103 amends subclause 34(3) of
Schedule 1 such that it will be for the ACCC, not the ACMA, to
provide written certificates concerning technical feasibility in
accordance with subclause 34(3). This reflects the amendment
to subclause 33(3) made by item 98.

Item 104
- Subclause 34(4) of Schedule 1

Subclause 34(4) sets out the matters the ACMA
must have regard to in determining whether compliance with
subclause 34(4) in relation to a site of a telecommunications
transmission tower is technically feasible.

Item 104 amends subclause 34(4) by replacing
all references to the ‘ACMA’ with the
‘ACCC’. This represents a consequential amendment
stemming from the change in entities responsible for issuing
written certificates. No other substantive changes are made to
subclause 34(4).

Item 105
- After subclause 34(4) of Schedule 1

Item 105 inserts proposed subclause 34(4A),
which provides that the ACCC may consult with the ACMA before
issuing a certificate under subclause 34(3). Consultation with the
ACMA is not mandatory, although it is envisaged that it will occur
as appropriate.

Item 106 - Subclause 34(5) of
Schedule 1

Item 106 amends subclause 34(5) by replacing
all references to the ‘ACMA’ with the
‘ACCC’. This represents a consequential amendment
stemming from the change in entities responsible for issuing
certificates concerning technical feasibility under Part 5 of
Schedule 1.

Item 107 - At the end of clause 34 of
Schedule 1

Item 107 inserts proposed subclauses 34(6),
(7), and (8).

Subclause 34(1) sets out a general rule which
requires the first carrier, if requested to do so by another
carrier (the second carrier), to give access to sites of
telecommunications transmission towers owned or operated by the
first carrier.

Proposed subclause 34(6) provides for three
additional exceptions to the general access rule set out in
subclause 34(1). These three new exceptions mirror those
under proposed new subclauses 17(2A), 33(6) and 35(6), except that
they relate to sites of telecommunications transmission
towers. Those exceptions are explained in detail in the notes
on proposed subclause 17(2A), at item 93.

Proposed subclause 34(8) clarifies that for
the purposes of subclause 34(1), if there is an agreement between
Telstra and an NBN corporation that relates to the NBN
corporation’s access to the site of a telecommunications
tower owned, occupied or controlled by Telstra, or which Telstra
has a right to use, and apart from this provision the effect of the
agreement would be that the NBN corporation would be considered to
be the occupier or controller of the site, or would have a right to
use the site, then the NBN corporation is not taken to be the
occupier or controller of the site, and not to have a right to use
the site. The reason for this is as explained in the note in
relation to proposed subclause 17(4A), see item 94, above.

Item 108
- Subclause 35(3) of Schedule 1

Item 108 amends subclause 35(3) of
Schedule 1 such that it will be for the ACCC, not the ACMA, to
provide written certificates concerning technical feasibility in
accordance with subclause 35(3). This reflects the amendment
to subclause 33(3) made by item 70BE, and the amendment to
subclause 34(3) made by item 103.

Item 109 - Subclause 35(4) of
Schedule 1

Existing subclause 35(4) sets out the matters
the ACMA must have regard to in determining whether compliance with
subclause 35(1) in relation to eligible underground facilities is
technically feasible.

Item 109 amends subclause 35(4) by replacing
all references to the ‘ACMA’ with the
‘ACCC’.

Item 110
- After subclause 35(4) of Schedule 1

Item 110 inserts proposed subclause 35(4A),
which provides that the ACCC may consult with the ACMA before
issuing a certificate under subclause 35(3). This represents a
consequential amendment. Consultation with the ACMA is not
mandatory, although it is envisaged that it will occur as
appropriate.

Item 111 - Subclause 35(5) of
Schedule 1

Item 111 amends subclause 35(5) by replacing
all references to the ‘ACMA’ with the
‘ACCC’. No other substantive changes are made to
subclause 35(5).

Item 112 - At the end of clause 35 of
Schedule 1

Item 112 inserts proposed subclauses 35(6),
(7), and (8).

Subclause 35(1) set out a general rule which
requires the first carrier, if requested to do so by another
carrier (the second carrier), to give access to eligible
underground facilities owned or operated by the first
carrier.

Item 112 would insert a proposed subclause
35(6) which sets out three additional exceptions to the general
access rule under subclause 35(1). These three new exceptions
are substantially similar to those set out in proposed new
subclauses 17(2A), 33(6) and 34(6), except that they relate to
eligible underground facilities. Those exceptions are
explained in detail in the notes on proposed subclause 17(2A),
at item 93.

Proposed subclause 35(8) clarifies that for
the purposes of subclause 35(1), if there is an agreement between
Telstra and an NBN corporation that relates to the NBN
corporation’s access to an eligible underground facility
owned or operated by Telstra, and apart from this provision the
effect of the agreement would be that the NBN corporation would be
considered to be the operator of the facility, then the NBN
corporation is taken not to be the operator of the facility.
The reason for this is as explained in the note in relation to
proposed subclause 17(4A), see item 94, above.

Item 113
- At the end of clause 36 of Schedule 1

Item 113 inserts proposed subclauses 36(7) and
(8), which provide limitations on determinations made by an
arbitrator under clause 36, and operate in the same way as proposed
subclauses 18(6) and (7), inserted by item 96, which are described
in detail in the notes for that provision.

Competition and Consumer Act
2010

Item 114 - Section 152AA

Item 114 amends the outline of Part XIC of the
CCA at section 152AA to take account of the changes to that Part
made by the items that follow.

Item 115 - Section 152AC

Item 115 includes in section 152AC of the CCA
a reference to ‘access agreement’, which is a term
defined in proposed section 152BE (see item 160).

Item 116 - Section 152AC

Item 116 includes in section 152AC of the CCA
a definition of the term ‘access determination’.
An access determination is a determination made under proposed
section 152BC, inserted as part of proposed Division 4 of Part XIC
(see item 160).

Item 117
- Section 152AC (definition of access
undertaking )

Item 117 amends the definition of
‘access undertaking’ in section 152AC of the CCA to
remove reference to an ordinary access undertaking. As a
result of the amendments made to Part XIC of the CCA by the Bill,
ordinary access undertakings will no longer be a part of the
telecommunications access regime. Only special access
undertakings will be available.

Item 118
- Section 152AC

Item 118
inserts in section 152AC of the CCA a definition of ‘binding
rules of conduct’, and provides that this term refers to
rules made under proposed subsection 152BD(1), inserted as
part of proposed Division 4A of Part XIC (see item 160).

Item 119
- Section 152AC

Item 119 inserts into section 152AC of the CCA
a definition of the term ‘final access determination’,
and provides that this term refers to an access determination other
than an ‘interim access determination’ (the definition
of the latter term is also included in section 152AC by the Bill
- see item 122).

Item 120 - Section 152AC

Item 120 includes in section 152AC of the CCA
a definition of the term ‘fixed principles provision’,
which is a term defined in proposed section 152BCD, inserted as
part of proposed Division 4 of Part XIC (see item 160).

Item 121 - Section 152AC

Item 121 inserts into section 152AC of the CCA
a definition of the term ‘fixed principles term or
condition’, which is a term defined in proposed
section 152CBAA, inserted as part of proposed Division 4 of
Part XIC (see item 166).

Item 122 - Section 152AC

Item 122 inserts into section 152AC of the CCA
a definition of the term ‘interim access
determination’, and provides that this term refers to an
access determination that is expressed to be an interim access
determination. The requirement for interim access
determinations is set out in proposed section 152BCG.

Item 123
- Section 152AC (definition of ordinary access
undertaking )

Item 123 repeals the definition of
‘ordinary access undertaking’. Ordinary access
undertakings are dealt with in the current Subdivision A of
Division 5 of Part XIC, which is repealed by item 161.

Item 124 repeals the definition of
‘telecommunications access code’.
Telecommunications access codes are dealt with in the current
Division 4 of Part XIC. As a result of the amendment made by
item 160, current Division 4 of Part XIC is repealed and
replaced.

Item 125
- Section 152AC

Item 125 inserts a definition of
‘variation agreement’ into section 152AC. This
term has the meaning given to it by proposed subsection
152BE(3).

Item 126 - At the end of section
152AF

Item 126 inserts proposed subsection
152AF(3). Section 152AF deals with the scope of the term
‘access’, and provides (at subsection 152AF(2)) that
anything done by a carrier or a CSP in fulfilment of a standard
access obligation is taken to be an aspect of access to a declared
service.

Proposed subsection 152AF(3) provides that
anything done by a carrier or CSP in fulfilment of a requirement
that is imposed on the carrier or CSP by an access determination is
taken to be an aspect of access to a declared service.

Item 127 - After section
152AH

Item 127 inserts proposed section 152AI into
Part XIC of the CCA.

Proposed
section 152AI When public inquiry
commences

Proposed section 152AI clarifies, for the
purposes of Part XIC, that a public inquiry under Part 25 of the
Tel Act commences when the ACCC publishes the notice required under
section 498 of that Act. This provision is necessary as,
under the amendments made to Part XIC by the Bill, the ACCC is
subject to certain timeframes that apply from the commencement of a
public inquiry. For example, under proposed section 152BCG,
the ACCC must make an interim access determination if it is
unlikely that the final access determination in relation to a newly
declared service will be in place six months after the commencement
of the public inquiry relating to the making of the access
determination.

Item 128 - Subsection
152ALA(2)

Item 128
repeals current subsection 152ALA(2) and replaces it with proposed
subsection 152ALA(2) . Currently, subsection 152ALA(2)
provides that an access declaration made by the ACCC under section
152AL must specify an expiry date that occurs within the five-year
period beginning when the access declaration was made. The
effect of proposed subsection 152ALA(2) is to allow an access
declaration to specify an expiry date that is more than five years
after the declaration was made. However, the proposed
subsection also provides that in specifying an expiry date, the
ACCC is to have regard to the principle that the duration of an
access declaration should be between three and five years, unless
the ACCC considers that there are circumstances that warrant making
an access declaration with a duration shorter than three years or
longer than five years. The ACCC may also have regard to
other matters it considers relevant in specifying an expiry
date.

This amendment is intended to enable the ACCC
to provide longer-term regulatory certainty, where appropriate, to
promote competition and investment.

Item 129
- After subsection 152ALA(6)

Item 129
inserts proposed subsection 152ALA(6A). Subsection 152ALA(6)
clarifies that, if an access declaration made by the ACCC under
section 152AL expires, the ACCC is not prevented from making a
fresh declaration under section 152AL in the same terms as the
expired determination. The effect of proposed
subsection 152ALA(6A) is that the fresh declaration is taken
to ‘replace’ the expired declaration. The concept
of a fresh declaration replacing an expired declaration is relevant
in determining the duration of an access determination (see
proposed subsection 152BCF(3)), and is also relevant to the
automatic revocation of an access determination (see proposed
subsections 152BCF(8) and (9)).

Item 130 - Paragraph
152ALA(7)(a)

Item 130 amends paragraph 152ALA(7)(a).
Currently paragraph 152ALA(7)(a) requires the ACCC, within the
18-month period ending on the expiry of a declaration, to hold a
public inquiry under Part 25 of the Tel Act about whether to
extend, further extend, revoke or vary the declaration. The
amendment made to paragraph 152ALA(7)(a) would extend the time
period for holding this inquiry, so that the ACCC must hold it
within the 18-month period ending on the expiry of a
declaration. This would make the period for holding the
inquiry consistent with the 18-month period during which the
ACCC is required to hold a public inquiry into making an access
determination (see proposed subsection 152BCI(3)). The note
at item 130 makes a consequential change to the heading of
subsection 152ALA(7).

Item 131 - After subparagraph
152ALA(7)(a)(v)

Item 131 makes a further amendment to
paragraph 152ALA(7)(a) by inserting proposed subparagraph
152ALA(7)(a)(vi), the effect of which is that, after holding a
public inquiry, the ACCC can make a decision to extend (or further
extend) the expiry date of a declaration by 12 months or less and
allow the declaration to expire. Where the ACCC decides that
a service should no longer be declared, this provision will enable
it to extend the declaration for a short time to enable access
seekers to transition to other services, and removes the need for
an additional inquiry prior to the extended expiry date.

Item 132
- Subsection 152AM(3)

Item 132 repeals current subsection 152AM(3)
and replaces it with proposed subsection 152AM(3). Section
152AM applies to public inquiries that the ACCC holds about
declaring services (under paragraph 152AL(3)(a)) or about the
extension, variation, revocation, or expiry of a declaration (under
paragraph 152ALA(7)(a)). Subsection 152AM(2) provides that
the ACCC may hold an inquiry on its own initiative, or if requested
in writing to do so by any person. Subsection 152AM(3)
currently requires the ACCC, if it decides not to hold an inquiry
after a person has requested it to do so, to notify the person in
writing of its decision and its reasons for the decision.
Item 123 repeals and replaces subsection 152AM(3). Proposed
subsection 152CM(3) provides that the ACCC does not have a duty to
consider whether to hold an inquiry about a proposal to declare a
service under paragraph 152AL(3)(a) if it is requested to do
so by a person. This amendment is intended to streamline the
operation of sections 152AL and 152ALA, by removing the requirement
for the ACCC to consider each request that it receives to hold an
inquiry and to provide reasons if it decides not to proceed with an
inquiry.

Item 133
- Subsection 152AQ(3)

Item 134
- Subsections 152AQ(4), (5) and (6)

Section 152AQ requires the ACCC to keep a
Register of declarations made under section 152AL. Item 134
repeals subsections 152AQ(4), (5) and (6), which provide for the
inspection and copying of the Register, and replaces them with
proposed subsection 152AQ(4), which provides that the Register is
to be made available for inspection on the ACCC website, and
proposed subsection 152AQ(5), which clarifies that the Register is
not a legislative instrument. Item 133 makes a related change
to subsection 152AQ(3), with the effect that the ACCC is required
to (rather than permitted to) maintain the Register by electronic
means.

Item 135
- Sections 152AQA and 152AQB

Section 152AQA requires the ACCC to determine
in writing principles that relate to the price of access to a
declared service (‘pricing principles’). Section
152AQB requires the ACCC to make a determination setting out model
terms and conditions for certain specified declared services.
The ACCC is required to have regard to both relevant pricing
principles and model terms and conditions if it is required to
arbitrate an access dispute under Division 8 of Part XIC. As
Division 8 of Part XIC is being repealed by the Bill, item 135
makes a consequential amendment to repeal both sections 152AQA and
152AQB.

Item 136 - Subsection 152AR(12)
(definition of pre-request right )

Item 136 makes a change to the definition of
‘pre-request right’ at subsection 152AR(12) that
is necessary as a consequence of the repeal of Division 8 of Part
XIC by item 185 below.

Item 137
- Section 152AS

One of the reforms to Part XIC implemented by
the Bill is to change the system of exemptions from the standard
access obligations. As a result of the changes made to Part
XIC by the Bill ordinary exemptions from the standard access
obligations will no longer be available. An ordinary
exemption is an exemption that applies in relation to a service
that is a declared service at the time the exemption determination
is made by the ACCC. Following the reforms made by the Bill,
the ACCC will only be able to issue anticipatory exemptions.
An anticipatory exemption is an exemption that applies to a service
that is not a declared service at the time the exemption
determination is made. An anticipatory exemption provides
that, in the event the service in question is declared by the ACCC
under section 152AL, a particular carrier/CSP (under
section 152ATA) or members of a class of carriers/CSPs
(section 152ASA) are exempt from the requirements to comply
with the standard access obligations in relation to the declared
service.

Item 137 repeals section 152AS, which provides
for ordinary class exemptions from the standard access obligations
in section 152AR. The need for ordinary class exemptions is
removed because the ACCC will be able to include provisions in an
access determination which remove or limit the obligation of
carriers or CSPs to comply with some or all of the standard access
obligations (see proposed paragraphs 152BC(3)(h) and (i)).

Item 139 provides that an anticipatory class
exemption may include a provision (here called an
“entrenching provision”) stating either that the
exemption must not be varied or revoked (proposed paragraphs
152ASA(2A)(a) and 152ASA(2B)(a)) or that the exemption must not be
varied or revoked except in certain specified circumstances
(proposed paragraphs 152ASA(2A)(b) and
152ASA(2B)(b)).

An entrenching provision in an anticipatory
class exemption may itself not be varied or removed, and nor may
the anticipatory class exemption be varied in a manner that is
inconsistent with an entrenching provision: proposed subsections
152ASA(11B) and (11C) (see item 141).

Item 140 makes a consequential amendment to
subsection 152ASA(8), necessary as a result of the repeal of
section 152AS by item 137.

Item 141
- After subsection 152ASA(11)

Item 141 inserts proposed subsections
152ASA(11A), (11B) and (11C). The effect of these provisions
is to alter the operation of subsection 33(3) of the AIA as it
relates to the ACCC’s power to vary or revoke orders
concerning anticipatory class exemptions. The effect of
subsection 33(3) of the AIA is altered to give effect to the
amendments made by item 139, which provide that the ACCC may choose
to nominate certain provisions of an anticipatory class exemption
as entrenching provisions.

Item 142 - Subsection
152ASA(12)

Item 142 revokes subsection 152ASA(12), which
provides that an anticipatory class exemption instrument is a
disallowable instrument for the purposes of the LIA, and replaces
it with a provision stating that such an instrument is not a
legislative instrument for the purposes of the LIA.

Under the LIA, legislative instruments are
subject to Parliamentary disallowance which would not be
appropriate for instruments made under Part XIC. Where the
ACCC uses a number of inter-related instruments to deal with a
matter, disallowance of one instrument could result in inconsistent
and undesirable regulatory outcomes. The Bill provides for
consultation before making the instruments and for the termination
of the instruments (which makes it unnecessary and/or inappropriate
for the consultation and automatic ‘sunsetting’
requirements in the LIA to apply).

Item 143 - Subsection 152ASA(13)
(note)

Item 143 repeals the note at subsection
152ASA(13). It is no longer necessary as a result of the
amendment made by item 141.

Item 144
- Section 152AT

Item 144 repeals section 152AT, which provides
for ordinary individual exemptions from the standard access
obligations at section 152AR. The consequences of, and
reasons for, the repeal of ordinary exemptions are discussed above
at item 137.

Item 145
- After subsection 152ATA(3)

Item 145 clarifies the intended operation of
section 152ATA (which provides for anticipatory individual
exemptions from the standard access obligations), and clarifies the
effect of the repeal of section 152AT, by including proposed
subsection 152ATA(3A), which states that a service must not be
specified in an anticipatory individual exemption order if, at the
time the order is made, the service is a declared service.

Item 146
- After subsection 152ATA(4)

Item 146 provides that an anticipatory
individual exemption may include a provision (here called an
“entrenching provision”) stating that either that the
exemption must not be varied or revoked (proposed paragraphs
152ATA(4A)(a) and 152ATA(4B)(a)) or that the exemption must not be
varied or revoked except in certain specified circumstances
(proposed paragraphs 152ATA(4A)(b) and 152ATA(4B(b)).

An entrenching provision in an anticipatory
individual exemption may itself not be varied or removed, and nor
may the anticipatory individual exemption be varied in a manner
that is inconsistent with an entrenching provision: proposed
subsections 152ATA(16B) and (16C) (see item 149).

An entrenching provision will enable
anticipatory individual exemptions to afford a higher degree of
regulatory certainty to the exempted carriers or CSPs.

Item 147
- After subsection 152ATA(6)

Item 147 inserts proposed subsection
152ATA(7), which provides a mechanism for the ACCC to refuse to
consider serial anticipatory individual exemptions. Where the
ACCC rejects one application for an anticipatory individual
exemption by a person, and the person subsequently makes another
application for an anticipatory individual exemption, and the first
application and the later application are materially similar, or
the grounds on which the person made the first application are
materially similar to the grounds on which the person made the
later application, then the ACCC can refuse to consider the later
application. This provision is intended to ensure that the
ACCC does not have to devote time and resources to considering an
application for an anticipatory individual exemption that is likely
to be rejected.

Item 148 - Subsection
152ATA(10)

Item 148 makes a consequential amendment to
subsection 152ATA(10), necessary as a result of the repeal of
section 152AT by item 144.

Item 149
- After subsection 152ATA(16)

Item 149 inserts proposed subsections
152ATA(16A), (16B) and (16C). The effect of these provisions
is to alter the operation of subsection 33(3) of the AIA as it
relates to the ACCC’s power to vary or revoke orders
concerning anticipatory individual exemptions. The effect of
subsection 33(3) of the AIA is altered to give effect to the
amendments made by item 146, which provide that the ACCC may choose
to nominate certain provisions of an anticipatory individual
exemption as entrenching provisions.

Item 150 - Subsection 152ATA(18)
note

Item 150 repeals the note at subsection
152ATA(18). It is no longer necessary as a result of the
amendment made by item 149.

Item 151
- Subsection 152AU(1)

Item 151 makes a consequential amendment to
subsection 152AU(1), necessary as a result of the repeal of section
152AT by item 144.

Item 152
- Sections 152AV to 152AX

Item 152 provides for the repeal of sections
152AV, 152AW and 152AX. These sections deal with the review
by the Australian Competition Tribunal of ACCC decisions relating
to ordinary and anticipatory individual exemptions. Ordinary
individual exemptions will no longer be available after the
amendments made by the Bill: see item 144. The effect of item
152 is therefore to remove merits review in the Australian
Competition Tribunal of ACCC decisions relating to anticipatory
individual exemptions.

Merits review of ACCC decisions under the CCA
can contribute to delays and regulatory uncertainty. This is
problematic in the telecommunications sector which is characterised
by rapid technological advances and changing market
conditions. The ACCC’s decisions are subject to
judicial review by the Federal Court under the Administrative
Decisions (Judicial Review) Act 1977 .

Item 153
- Subsection 152AXA(1)

Item 154
- Paragraph 152AXA(1)(a)

Item 155
- Subsection 152AXA(2)

Items 153, 154 and 155 make consequential
changes to section 152AXA, which are necessary as a result of the
repeal of section 152AT by item 100 and the repeal of provisions
allowing merits review for anticipatory individual exemptions by
item 152.

Item 156 -
Section 152AY

As a result of amendments made elsewhere in
Part 2 of Schedule 1 of the Bill, item 156 repeals and
replaces section 152AY, which sets out the terms and conditions on
which a carrier/CSP must comply with the standard access
obligations.

o If so,
then the terms and conditions relating to that matter are as set
out in the access agreement.

o If not,
then…

-
…is there a special access undertaking given by the
carrier/CSP that is in force and that specifies terms and
conditions relating to that matter?

o If so,
then the terms and conditions are as set out in the
undertaking.

o If not,
then…

-
…are there binding rules of conduct that specify terms and
conditions relating to that matter?

o If so,
then the terms and conditions relating to that matter are as set
out in the binding rules of conduct.

o If not,
then…

-
…is there an access determination that specifies terms and
conditions relating to that matter?

o If so,
then the terms and conditions relating to that matter are as set
out in the access determination.

o If not,
then the terms and conditions relating to that matter will need to
be dealt with using one of the three methods above.

This means that where terms and conditions
relating to a matter are not currently covered by an access
agreement, a special access undertaking, binding rules of conduct
or an access determination, those terms and conditions will need to
be addressed using one of those mechanisms. For example, in
this circumstance the parties to an access agreement could vary
their access agreement to take account of the matter and include
additional terms and conditions. Or, the ACCC could include
terms and conditions relating to the matter in new binding rules of
conduct or a new or varied access determination.

The provisions in proposed Division 4A
relating to binding rules of conduct are intended to allow the ACCC
to make urgent and temporary arrangements to deal with terms and
conditions of access to declared services: this may include dealing
with the situation where the terms and conditions on which a
carrier/CSP must comply with the standard access obligations are
not currently specified elsewhere.

Three notes are included at the end of
proposed section 152AY.

The first note alerts the reader that, before
considering the hierarchy that is set out at proposed subsection
152AY(2) and is described above, it is necessary to consider
certain listed provisions of Part XIC that are inserted by the
Bill, and that specify how inconsistency is to be addressed.
For example, proposed section 152CBIC provides that an access
agreement will prevail over a special access undertaking, to the
extent of any inconsistency in the terms and conditions set out in
them. So if an access agreement between a carrier/CSP and an
access seeker and a special access undertaking given by that
carrier/CSP both contain terms and conditions dealing with a
particular matter, in considering the application of the hierarchy
at proposed section 152AY in such a circumstance, in effect
the special access undertaking is taken not to address the matter:
it has no effect to the extent of the inconsistency.

The third note indicates that transitional
provisions are included in Division 2 of Schedule 1 of the
Bill. Specifically, item 208 of the Bill deals with the
hierarchy that is to apply in the transition from the operation of
the current Part XIC to the operation of Part XIC as amended
by the Bill. Item 208 includes arbitration
determinations made by the ACCC in that hierarchy.

Item 157 - Paragraph
152BBAA(1)(a)

Item 158 - Paragraph
152BBAA(1)(b)

Items 157 and 158 make consequential
amendments, necessary as a result of the repeal of sections 152AS
and 152AT by items 137 and 144.

Item 159
- Subsection 152BBC(5)

Item 159 makes a consequential amendment to
section 152BBC, necessary as a result of the repeal of Division 8
of Part XIC by item 185. It repeals subsection 152BBC(5),
which refers to arbitrations of access disputes under Division
8.

Item 160
- Division 4 of Part XIC

Current Division 4 of Part XIC deals with
telecommunications access codes. Item 160 repeals
current Division 4 and replaces it with:

-
proposed Division 4, which deals with access determinations;

-
proposed Division 4A, which deals with binding rules of conduct;
and

-
proposed Division 4B, which deals with access agreements.

Telecommunications access codes specify model
terms and conditions of access that can be adopted by an ordinary
access undertaking. As it is proposed to abolish ordinary
access undertakings (see item 161), there is no longer a need for
telecommunications access codes.

Proposed Division 4—Access
determinations

A key reform made by the Bill to Part XIC is
the removal of the ACCC’s function of arbitrating access
disputes between access providers and access seekers, and the
introduction of a power for the ACCC to set up front, in an access
determination, the terms and conditions of access to declared
services to apply to all access providers and all access
seekers.

Proposed Division 4 contains provisions
that:

-
enable the ACCC to make access determinations setting out the terms
and conditions of access for declared services;

-
specify particular requirements and limitations relating to the
content of access determinations;

-
set out the process the ACCC is required to follow in making access
determinations; and

-
deal with the variation, revocation and enforcement of access
determinations.

Proposed
Subdivision A—Commission may make access
determinations

Proposed Subdivision A of proposed Division 4
of Part XIC includes provisions dealing with the ACCC’s power
to make access determinations.

Proposed
section 152BC Access
determinations

Proposed section 152BC provides that the ACCC
may make written determinations relating to access to a declared
service, to be known as access determinations.

A list of matters that may be included in
access determinations is set out at proposed
subsection 152BC(3), and is based on the list of matters that
can be dealt with under an arbitration determination made by the
ACCC (which are set out at subsection 152CP(2)). (Note
that subsection 152CP(2) (and the rest of Division 8 of Part XIC)
is being repealed by item 185.)

Access determinations may specify any or all
of the terms and conditions on which a carrier/CSP is to comply
with any of the standard access obligations that apply to that
carrier/CSP (proposed paragraph 152BC(3)(a): see also proposed
section 152AY).

Notably, an access determination can impose
other requirements relating to access to a declared service on a
carrier/CSP, in addition to the standard access obligations
(proposed paragraph 152BC(3)(e)), and can specify the terms and
conditions on which the carrier/CSP is to meet those other
requirements (proposed paragraph 152BC(3)(f)). An access
determination can restrict or limit the application of one or more
of the standard access obligations to a carrier/CSP (proposed
paragraphs 152BC(3)(h) and (i)).

It is intended that an access determination
may deal only with terms and conditions about certain
matters relating to compliance with the standard access
obligations. It is not intended that an access determination
must deal with the terms and conditions about all matters
relating to compliance with the standard access obligations. To
ensure the intended operation of this provision is clear (that an
access determination is not required to deal with all terms and
conditions), subsection (3)(a) expressly provides that an access
determination may specify any or all of the terms and
conditions on which a carrier or carriage service provider is to
comply with any or all of the standard access obligations
applicable to the carrier or CSP.

Paragraph 152BC(3)(j) specifies that an access
determination may deal with any other matter relating to access to
a declared service. This item reflects the language used in
the opening words of existing subsection 152CP(2), which
provides for the ACCC to make written determinations when it
arbitrates access disputes: “The determination may deal with
any matter relating to access...”. The purpose of this
paragraph is to reinforce the fact that the ACCC can make access
determinations with a wide scope, just as the ACCC can make
determinations with a wide scope under the current Division 8 of
Part XIC of the CCA, which deals with the arbitration of access
disputes, and is repealed by item 185 of Schedule 1 to the
Bill.

The list of matters at proposed subsection
152BC(3) does not limit the matters that may be included in an
access determination (see proposed subsection 152BC(4)).

The terms and conditions that are specified in
an access determination must include terms and conditions relating
to price or a method of ascertaining price, which provides the ACCC
with flexibility in how it addresses pricing issues (proposed
subsection 152BC(8)).

While the intention is that access
determinations will include provisions that apply to all
carriers/CSPs and access seekers, it is recognised that there may
be instances where the ACCC needs to craft particular provisions
that apply specifically to particular carriers/CSPs or access
seekers, or to particular classes of carriers/CSPs or access
seekers. For this reason, proposed subsection 152BC(5)
provides that an access determination may make different provision
with respect to different carriers/CSPs, or different access
seekers, or different classes of carriers/CSPs or access
seekers. Proposed subsection 152BC(6) clarifies that proposed
subsection 152BC(5) does not, by implication, affect the
operation of subsection 33(3A) of the AIA, which provides
that, where legislation confers a power to make an instrument with
respect to particular matters, the power includes a power to make
the instrument with respect to only some of those matters or a
class or classes of those matters, and to make different provision
with respect to different matters or different classes of
matters.

An access determination may provide for the
ACCC to perform functions or exercise powers (proposed subsection
152BC(7)). This enables an access determination, for example,
to specify that particular complex or changing matters can be
determined or approved by the ACCC at intervals during the duration
of the access determination. For example, an access
determination might set an up-front regulatory asset base and
provide that any additions to the regulatory asset base during the
period of the determination must be approved by the ACCC.

Under the LIA, legislative instruments are
subject to tabling and disallowance, requirements for consultation
and registration on the Federal Register of Legislative
Instruments, and are also subject to automatic sunsetting after ten
years.

Access determinations will deal with complex
and technical issues relating to the price at which, and the other
terms on which, key essential telecommunications services are
supplied to other carriers and/or CSPs. They will be made by
the ACCC after a public inquiry in which it will consider
submissions from industry participants and other interested
parties. The terms of supply of one declared service are
likely to have flow-on effects on the supply of other declared and
non-declared services. When making an access determination,
the ACCC will have to undertake an assessment of the costs of
supplying the declared service, the current state of competition
and investment in relation to the supply of the service, and the
likely effect of the determination on future competition and
investment. The ACCC, as the independent expert regulator
responsible for administering the access regime in Part XIC,
is best placed to make these kinds of regulatory decisions.
Making access determinations disallowable would subject them to the
risk of selective parliamentary override, which could undermine the
perceived integrity and effectiveness of the access regime.

Since the Bill makes express provision for
public consultation (in the form of a public inquiry) before the
ACCC makes an access determination, expressly deals with the
duration of access determinations, and requires access
determinations to be included on a public Register, the
consultation, registration and sunsetting requirements in the LIA
are unnecessary and/or inappropriate for access determinations.

The effect of proposed subsection 152BCA(2) is
that, in making an access determination in relation to a particular
service that is provided by a carrier or CSP, the ACCC can take
into account relevant aspects of other eligible services (as that
term is defined in section 152AL) that are supplied by that carrier
or CSP. Proposed subsection 152BCA(2) is intended to
ensure that, in making an access determination that applies to
carriers or CSPs, the ACCC is not limited to considering the
particular declared service that the access determination relates
to in isolation, but is able to consider it in the context of the
other relevant services which the carrier or CSP provides.
For instance, when specifying the access price for a declared
service which is supplied by an access provider over a particular
network or facility, the ACCC can take into account not only the
access provider’s costs and revenues associated with the
declared service, but also the costs and revenues associated with
other services supplied over that network or facility.

Proposed subsection 152BCA(3) clarifies that,
in making an access determination, the ACCC may take into account
other matters that it thinks are relevant.

The requirements in proposed section 152BCA do
not apply to the making by the ACCC of interim access
determinations (see proposed subsection 152BCA(4)), which are dealt
with by proposed section 152BCG.

Proposed subsection 152BCB(3) provides that
the ACCC must not make an access determination that is inconsistent
with the standard access obligations applicable to a carrier or
CSP. It should be noted that proposed paragraphs 152BC(3)(h)
and (i) enable the ACCC to limit the standard access obligations
that are applicable to a carrier/CSP.

Proposed subsection 152BCB(3A) imposes a
further restriction on the ability of the ACCC to make an access
determination. This restriction would only apply if a final
migration plan is in force under proposed section 577BE of the Tel
Act: that is, if Telstra has submitted to the ACCC a structural
separation undertaking which the ACCC has accepted, and that
undertaking required Telstra to submit a draft migration plan to
the ACCC for its approval, which Telstra has then submitted and the
ACCC has then approved.

In these circumstances, the ACCC must not make
an access determination that would have the effect of requiring
Telstra to engage in conduct in connection with matters covered by
its migration plan.

The reason for this limitation is to provide
Telstra with a high level of certainty that once its migration plan
has been accepted by the ACCC, the ACCC cannot subsequently use its
access determination powers to impose additional obligations on
Telstra in relation to migration.

The restriction on the ability of the ACCC to
make access determinations is effects-based: it applies regardless
of the party to whom the access determination is expressed to
apply. Access determinations can make different provision
with respect to different carriers or CSPs, and with respect to
different access seekers (see proposed subsection 152BC(5)).
The effect of proposed subsection 152BCB(3A) is that the ACCC must
not make access determinations that have the effect of requiring
Telstra to engage in conduct of the type described above,
irrespective of whether the access determination applies to Telstra
alone, or to Telstra and other carriers/CSPs, or only to one or
more other carriers/CSPs.

If an access determination has any of the
effects in proposed subsection 152BCB(1), (3) or (3A), then the
access determination does not operate to the extent that it would
have those effects (proposed subsection 152BCB(5)).

Among the prohibited effects in proposed
subsection 152BCB(1), the ACCC must not make an access
determination that would have the effect of requiring a carrier or
CSP to provide an access seeker with access to a declared service
if there are reasonable grounds to believe that the access seeker
would fail to comply with the terms of access (proposed
subparagraph 152BCB(1)(g)(i)). Proposed subsection
152BCB(2) sets out examples of grounds for holding that belief, and
is based on the comparable provision that currently applies to the
making of arbitration determinations (subsection 152CQ(3)).

Proposed subsection 152BCB(4) (modelled on
current subsection 152CQ(8)) deals with the effect of an access
determination which deprives a person of a pre-determination right
(which is not a protected contractual right) which does not
infringe paragraph 152BCB(1)(b) or (d) insofar as the person will
not actually need to exercise the right to meet his or her actual
requirements. Where an access determination has the effect of
depriving a person of a pre-determination right in force at the
time the determination came into force, the determination must also
require the access seeker to:

-
pay to the person such compensation (if any) that the ACCC
considers fair compensation for the loss of the contractual right;
and

-
reimburse the carrier or provider and the Commonwealth for any
compensation that the carrier or provider or the Commonwealth
agrees or is required under court order to pay to the person as
compensation for the loss of the contractual right.

Carriers/CSPs and access seekers are free to
negotiate on, and agree to, terms of access to declared
services. If a carriers/CSP and an access seeker settle on an
agreed arrangement for access to declared services, that
arrangement is called an access agreement. Access agreements
are dealt with in proposed Division 4B of Part XIC of the
CCA.

Proposed section 152BCC deals with the
situation where an access determination is inconsistent with an
access agreement between a carrier/CSP and an access seeker.
Subsection 152BCC(1) specifies a general rule that if an access
determination is applicable to a carrier/CSP and an access seeker,
the access determination has no effect to the extent to which it is
inconsistent with an access agreement applicable to those
parties. In such a circumstance, the access to the declared
service concerned is governed by the agreement reached between the
two parties.

This provision is reflected in proposed
subsection 152AY, inserted by item 156, which establishes a
hierarchy for identifying the terms and conditions on which a
carrier/CSP must comply with the standard access obligations.

A note in proposed section 152AY alerts the
reader that, before considering the hierarchy that is set out at
proposed subsection 152AY(2), it is necessary to consider certain
listed provisions of Part XIC of the CCA that are inserted by the
Bill, and that specify how inconsistency is to be addressed,
including proposed section 152BCC.

Proposed section 152BCCA provides for final
migration plans (see proposed section 577BE in proposed Part
33 of the Tel Act, inserted by item 30) to prevail over
inconsistent access determinations.

The effect of proposed section 152BCCA is
that, if a final migration plan is in force, then an access
determination has no effect to the extent to which it would have
the effect of:

-
preventing Telstra from complying with the final migration plan;
or

-
requiring Telstra engage in conduct in connection with matters
covered by its final migration plan.

The reason for this limitation is to provide
Telstra with a high level of certainty that once its migration plan
has been accepted by the ACCC, access determinations (including
those which may pre-date the final migration plan) will not
subsequently operate so as to impose additional obligations on
Telstra in relation to migration, or so as to prevent Telstra from
complying with its final migration plan. Proposed
section 152BCB(3A)) provides that, if a final migration plan
is in force, the ACCC must not make an access determination that
would have the effect of requiring Telstra to engage in conduct in
connection with matters covered by its migration plan.
Proposed subsection 152BCCA goes further: it also applies to access
determinations that are made by the ACCC before a final migration
plan comes into force. From the time a final migration plan
comes into force, an access determination has no effect to the
extent that it would have either of the effects listed at proposed
paragraphs 152BCCA(a) or (b).

Proposed section 152BCD provides for
‘fixed principles provisions’. The ACCC can
include in an access determination a provision that is specified to
be a fixed principles provision. The effect of specifying
that a provision is a fixed principles provision is to “lock
in” the matters dealt with in that provision until a
particular date (called the ‘nominal termination date’
in proposed subsection 152BCD(2)). The nominal termination
date can occur after the expiry date of the access determination in
which the fixed principles provision appears. The reason that
the termination date is a ‘nominal’ termination date is
that, although a fixed principles provision ceases to be in force
at the same time as the access determination in which it appears
(“the original access determination”) ceases to be in
force (see proposed subsection 152BCD(4)), the effect of
proposed subsection 152BCD(3) is that:

-
any access determination that replaces the original access
determination must include a fixed principles provision in the same
terms as the fixed principles provision in the original access
determination; and

-
the nominal expiry date of the fixed principles provision in the
replacement access determination must be the same as or later than
the nominal expiry date of the fixed principles provision in the
original access determination.

For example, if a fixed principles provision
is included in an access determination (“the first access
determination”) that has an expiry date of 15 May 2012, and
the nominal expiry date of the fixed principles provision in that
access determination is 8 October 2014:

-
if the expiry date of the access determination is extended until 18
April 2013 under proposed subsection 152BCF(10)), then the fixed
principles provision continues to operate until that date;

-
if the first access determination is then replaced by a new access
determination, then the fixed principles provision ceases to be in
force at the same time that the first access determination ceases
to be in force, but the replacement access determination must
include a fixed principles provision in the same terms, and the
nominal expiry date for that fixed principles provision must be 8
October 2014 or later (regardless of the expiry date of the new
access determination).

The effect of “locking in” or
entrenching the fixed principles provision is achieved by proposed
subsection 152BCD(5), which provides that an access determination
which includes a fixed principles provision must include a
provision (here called an “entrenching provision”) that
states the fixed principles provision must not be altered or
removed, or sets out the circumstances in which the fixed
principles provision can be altered or removed. Note that the
ACCC’s ability to vary an access determination is limited in
the sense that it cannot vary an access determination in a manner
inconsistent with the entrenching provision, nor can it vary or
remove the entrenching provision (see proposed subsection
152BCN(4)).

By enabling the ACCC to lock in provisions
contained in an access determination for a specified period (which
may be longer than the duration of the access determination in
which the provisions are contained), proposed section 152BCD will
enable the ACCC to provide greater regulatory certainty in certain
circumstances. For example, where the ACCC adopts a utility
pricing model for setting the access price for a declared service
- with all price determinations during the economic life of
the relevant facility based on a regulated asset base - the
ACCC will be able to lock in a regulated asset base for the
requisite period.

Proposed
section 152BCE Access determinations may be set
out in the same document

Each access determination made by the ACCC
relates to a particular declared service (see proposed subsection
152BC(1)). However, while the ACCC is required to make
separate access determinations for each declared service, the ACCC
does not have to deal with each and every declared service in a
separate document. Proposed section 152BCE clarifies
that two or more access determinations may be set out in the same
document.

The ACCC must specify in an access
determination that the determination comes into force on a
particular day, which may be on, after, or before the day on which
the determination is made.

Subsection
152BCF(2A) clarifies that the day on which an access determination
is specified to come into force cannot be earlier than the date of
commencement of proposed section 152BCF (see clause 2 of the
Bill).

It is not considered
appropriate for access determinations to apply retrospectively in
relation to the period before the date of commencement of proposed
section 152BCF. Disputes about access that arise before the
date of commencement can be dealt with by the ACCC under Division 8
of Part XIC of the CCA, which provides for the ACCC to arbitrate
access disputes; under section 152DNA of the CCA, the ACCC will be
able to backdate its arbitration determination to the date on which
the parties to the dispute commenced negotiations. Item 207
of Schedule 1 to the Bill is a transitional provision dealing with
the arbitration of access disputes, given the repeal of Division 8
of Part XIC of the CCA by item 185 of Schedule 1 to the
Bill.

Proposed subsection 152BCF(3) provides
that, for access determinations that relate to newly-declared
services (i.e. where the service is being declared for the first
time, and the declared service is covered by a declaration under
section 152AL, and the declaration is not a fresh declaration that
replaces a previous declaration) the day specified in the access
determination must not be earlier than the day on which the
declaration came into force. (On replacement declarations, see item
129). (The references in proposed section 152BCF to the
declared service being ‘covered by a declaration under
section 152AL’ mean that the declared service is a
declared service because it has been declared by the ACCC under
subsection 152AL(3), rather than because it is the subject of
a special access undertaking and is therefore taken to be a
declared service by virtue of subsection 152AL(7).)

Proposed subsection 152BCF(3A) sets out a rule
to apply when an access determination will commence in relation to
a service that is a declared service by virtue of the operation of
subsection 152AL(7) (because the service is the subject of a
special access undertaking that is in operation). In such a
case, the day specified in the access determination as the day on
which the determination comes into force must not be earlier than
the day on which the service became a declared service under
subsection 152AL(7).

Proposed subsection 152BCF(4) provides that
where an access determination replaces a previous access
determination relating to the same declared service and the former
access determination is not an interim access determination, then
the date that the replacement access determination comes into force
is the day immediately after the expiry of the previous access
determination.

Proposed subsection 152BCF(4A) provides that
where an access determination replaces a previous access
determination relating to the same declared service and the former
access determination is an interim access determination and the
declared service is covered by a declaration under section 152AL,
then the date that the replacement access determination comes into
force must not be earlier than the day on which the declaration
came into force.

The effect of proposed subsections 152BCF (4)
and (4A) is that a final access determination will be able to be
backdated to apply in relation to the period covered by a preceding
interim access determination, overriding the provisions of the
interim access determination. This is consistent with the
treatment of arbitration determinations under Division 8 of Part
XIC of the CCA: under section 152DNA, a final arbitration
determination can be backdated so as to override a preceding
interim arbitration determination.

Expiry date
- proposed subsections 152BCF(5)-(7)

The ACCC must specify in an access
determination the expiry date for the determination. In cases
where the declared services are covered by a declaration under
section 152AL, the general principle (to which the ACCC must have
regard in setting the expiry date for the access determination) is
that the expiry date for the determination should be the same as
the expiry date for the declaration, unless there are circumstances
that warrant specifying a different expiry date for the access
determination.

The principle that declarations and access
determinations should run in parallel will promote regulatory
certainty, as well as procedural efficiency in that it will enable
the ACCC to conduct the public inquiry into extending the
declaration of a service and the public inquiry into making a
replacement access determination for the service at the same
time. It is recognised, however, that there may be
circumstances where an access determination for a service covered
by a declaration under section 152AL that is shorter in duration
than the declaration period would be justified.

Proposed subsection 152BCF(7) clarifies that,
if the access determination has expired, Part XIC of the CCA does
not prevent the ACCC from making a fresh access determination on
the same terms as the expired access determination.

Automatic
revocation - proposed subsections 152BCF(8)-(9A)

If an access determination is in force in
relation to a declared service, and the declared service is covered
by a declaration under section 152AL, and the declaration ceases to
be in force or is revoked, then, unless the ACCC makes a fresh
declaration that replaces the previous declaration, the access
determination will be automatically revoked (proposed subsections
152BCF(8) and (9)). In these circumstances there is nothing
for the access determination to do: without a declared service to
apply to, the access determination is redundant. For this
reason such access determinations are automatically revoked.

This automatic revocation only applies in
cases where the service in question is covered by a declaration in
force under section 152AL. This is made clear by proposed
paragraph 182BCF(8)(b) and 152BCF(9)(b).

Proposed subsection 152BCF(9A) provides that
an interim access determination in relation to a declared service
is taken to be revoked at the time that a final access
determination for that service comes into force. This provision
removes the need for the ACCC to revoke an interim access
determination.

Extension - proposed subsections
152BCF(10)-(16)

Proposed subsections 152BCF(10) and (12)
provide for the extension of access determinations in two
circumstances:

-
where the ACCC has commenced a public inquiry about replacing an
access determination with a new access determination, but the new
access determination will not be made before the expiry of the
earlier access determination—in this case, the ACCC may
declare that the earlier access determination continues until the
new access determination comes into force; and

-
where the ACCC decides, after holding a public inquiry concerning
the expiry of a declaration of a service, to extend the declaration
by a period of not more than 12 months and then to allow the
declaration to expire (see item 131)—in this case, the ACCC
may extend the period of the relevant access determination by the
same period.

In either case, the ACCC is required to
publish a notice on its website relating to its decision (proposed
subsections 152BCF(11) and (13)). The requirements of
procedural fairness do not apply to the ACCC’s decision to
extend the access determination in either case. These
extensions are temporary measures and the ACCC will be able to make
them quickly without having to undertake consultation.

Proposed subsections 152BCF(15) and (16)
clarify that a declaration made under subsection (10) or an
instrument under subsection (12) will not be legislative
instruments. The reasons why these declarations and
instruments should not be subject to the requirements in the LIA
which apply to legislative instruments are as follows.

As indicated, these declarations and
instruments extend the duration of an existing access determination
for a short period. They do not change the content of an
existing access determination. They are therefore essentially
procedural stop-gap measures which are necessary to ensure that
there is no gap in time during which a declared service is not
covered by any access determination.

It would not be appropriate to subject these
declarations and instruments to the tabling and disallowance
provisions of the LIA. If such a determination or instrument
were disallowed, the result would be that there would be no access
determination in place for the declared service in question for the
relevant period (i.e. until the new access determination was put in
place). This would create regulatory uncertainty for
suppliers and users of the declared service and, potentially,
opportunities for access providers to exploit their market power in
respect of the declared service while an access determination was
not in place.

As these declarations and instruments only
extend the duration of existing access determinations for a short
time, and will frequently need to be made on an urgent basis, the
consultation requirement in the LIA would not be appropriate.

As proposed subsections 152BCF(11) and
(13) require the ACCC to publish these declarations and instruments
on its website, the registration requirement in the LIA is
unnecessary.

The automatic ten year sunsetting requirement
in the LIA is irrelevant to these declarations and instruments, as
their duration will be much shorter than ten years.

Proposed
section 152BCG Interim access
determinations

Proposed section 152BCG deals with interim
access determinations. An interim access determination is
defined in section 152AC as an access determination that is
expressed to be an interim access determination (see item
122).

The circumstances in which the ACCC is
required to make an interim access determination are set out in
proposed subsection 152BCG(1). An interim access
determination must be made if:

-
the ACCC declares a service after the commencement of section
152BCG;

-
the service is being declared for the first time, i.e. the
declaration is not a fresh declaration that replaces a previous
declaration (on replacement declarations, see item 129); and

-
the ACCC has commenced a public inquiry into a proposal to make an
access determination relating to the service (on public inquiries,
see proposed Subdivision B of proposed Division 4); and

-
either:

o it is
unlikely that a final access determination in relation to access to
the service will be made within six months after the commencement
of the relevant public inquiry; or

o there is
an urgent need to make an access determination before the end of
the public inquiry.

While the ACCC must make an interim
access determination in the circumstances specified in proposed
subsection 152BCG(1), under proposed subsection 152BCG(2) the ACCC
may make an interim access determination in relation to a
declared service if no access determination has previously been
made in relation to the service. (This subsection applies to
both newly-declared services and services that were declared before
the commencement of section 152BCG.)

The ACCC may not make an interim access
determination in any other circumstance (proposed subsection
152BCG(5)).

The ACCC must specify in an interim access
determination the day on which the determination comes into
force. That day may be on, after, or before the day on which
the determination is made, but must not be earlier than the day on
which the declaration of the service came into force (proposed
subsection 152BCG(3)).

Because of their urgent and temporary nature,
the requirements of procedural fairness do not apply to the making
by the ACCC of an interim access determination (proposed subsection
152BCG(4)).

Proposed
section 152BCGA Stay of access
determinations

Proposed section 152BCGA mirrors the operation
of section 152DNB (which is repealed as a result of the amendment
to the CCA made by item 185 of the Bill), by providing that:

-
particular provisions of the Administrative Decisions (Judicial
Review) Act 1977 , which enable the Federal Court and Federal
Magistrates Court to stay the operation of a decision that is under
judicial review until the completion of the judicial review
proceedings, do not apply to a decision of the ACCC to make an
access determination; and

-
the Federal Court must not stay a decision to make an access
determination while it finalises an application for a writ or
injunction under subsection 39B(1) of the Judiciary Act
1903 in relation to such a decision.

This provision will ensure the effective
operation of Part XIC of the CCA during any legal challenge to an
access determination, and will go some way to removing an incentive
to challenge access determinations for tactical reasons.

Proposed new subsection 152BDEA makes a
similar change in proposed Division 4A of Part XIC of the CCA, in
relation to binding rules of conduct.

Proposed
Subdivision B—Public inquiries about proposals to make access
determinations

Proposed Subdivision B of proposed Division 4
of Part XIC sets out the requirements for the ACCC to hold a public
inquiry before making an access determination, and sets out the
procedures applying to those inquiries.

Proposed
section 152BCH Access determinations to be made
after public inquiry

Proposed
section 152BCI When public inquiry must be
held

The general requirement, as set out in
proposed subsection 152BCH(1), is that before the ACCC makes an
access determination, the ACCC must hold a public inquiry under
Part 25 of the Tel Act on the proposal to make the determination,
and must prepare a report on the inquiry. The ACCC is
required to publish the report during the period of 180 days before
the ACCC makes the determination.

The ACCC is not required to hold a public
inquiry before making an interim access determination (see proposed
subsection 152BCH(2) and proposed section 152BCG).

The requirement for the ACCC to hold a public
inquiry before making an access determination is subject to
proposed section 152BCI, which sets out the period during which the
public inquiry must be commenced, and provides certain
exceptions.

Where the ACCC declares a service for the
first time, the ACCC must commence a public inquiry about a
proposal to make the first access determination applying to that
newly-declared service within 30 days after the declaration is made
(proposed subsection 152BCI(1)).

Where a service was declared before the
commencement of proposed section 152BCI, the ACCC must
commence a public inquiry about a proposal to make the first access
determination applying to that service within 12 months of the
commencement of proposed section 152BCI (proposed subsection
152BCI(2)). Proposed section 152BCI will commence the
day after the Bill receives the Royal Assent: see the table at
clause 2 of the Bill.

Proposed subsection 152BCI(3) deals with the
timing of public inquiries where an access determination has
previously been made in relation to a declared service. It
provides that, where a service is declared and there is already an
access determination applying to the service, the ACCC must
commence a public inquiry about a proposal to make a replacement
access determination not earlier than 18 months before the expiry
of the determination, and no later than six months before the
expiry of the determination.

The requirement in proposed subsection
152BCI(3) is subject to the exceptions in proposed subsections
152BCI(5)-(7).

Where the ACCC decides, after holding a public
inquiry concerning the expiry of a declaration of a service, to
extend the declaration by a period of not more than 12 months
and then to allow the declaration to expire (see item 131), the
ACCC does not have to hold a public inquiry into making a
replacement access determination (proposed subsection
152BCI(5)). In this case, the ACCC may extend the duration of
the relevant access determination so that it corresponds with the
extended duration of the access declaration (see proposed
subsection 152BCF(12)).

If the ACCC commences a public inquiry under
subsection 152ALA(7) into whether to extend the declaration of a
service to which an access determination relates or let it expire,
the ACCC does not have to commence a public inquiry into making a
replacement access determination until it decides whether to extend
the declaration. If it decides to extend the declaration, it
must commence a public inquiry into making a replacement access
determination before the expiry of the current access
determination. If it decides to let the declaration expire,
it does not have to hold a public inquiry into making a replacement
access determination (proposed subsection 152BCI(6)).

If the ACCC decides not to extend the
declaration of a service to which an access determination relates
but to let it expire, then the ACCC does not have to hold a public
inquiry into making a replacement access determination (proposed
subsection 152BCI(7)).

A note is included
at the end of proposed subsection 152BCI(7) which states that where
a service is a declared service under subsection 152AL(7) (i.e.
because the service is the subject of a special access
undertaking), there is no need for the ACCC to make a declaration
of the service under section 152AL. This means that the ACCC
is not obliged to hold an inquiry about a proposal to make an
access determination for the service under proposed section
152BCI. However, it is still open to the ACCC to make an
access determination in relation to the service (see proposed
subsection 152BC(1)). Before doing so, the ACCC must
hold a public inquiry into a proposal to make the determination
(proposed subsection 152BCH(1)). In the case where the ACCC
makes an access determination in relation to a service that is a
declared service because of the operation of subsection 152AL(7),
the effect of proposed section 152AY (described above) and of
proposed section 152CBIA (described below at item 174) is that the
access determination will only operate to the extent it includes
provisions about matters that are not addressed in the special
access undertaking. To the extent of any inconsistency
between the documents, the special access undertaking will
prevail.

Proposed subsection 152BCJ provides that the
ACCC may decide to combine two or more public inquiries about
proposals to make access determinations, and sets out certain
procedures applying to the ACCC’s conduct of joint
inquiries.

This provision is designed to provide the ACCC
with flexibility to conduct inquiries into proposals to make access
determinations in an efficient manner, by allowing it to combine
inquiries and prepare combined discussion papers, hold combined
hearings, and prepare combined reports relating to the
inquiries.

Proposed
section 152BCK Time limit for making an access
determination

Proposed subsection 152BCK(2) provides that
the ACCC must make a final access determination within six months
of commencing the public inquiry into the proposal to make the
access determination. A final access determination is an
access determination that is not an interim determination (see
item 119).

In recognition of the fact that an inquiry
into a proposal to make an access determination may be a lengthy
and complex process, the ACCC is given scope to extend the
six-month period within which it is required to make the final
access determination (proposed subsection 152BCK(3)). The
ACCC may extend the six-month period more than once, on each
occasion by no longer than a further period of six months.
Each time it extends the period, the ACCC must publish a notice on
its website setting out the extended period, and explaining why the
ACCC has not yet been able to make a final access
determination.

A note is included to direct the reader to
proposed section 152BCG, the effect of which is to require the ACCC
to make an interim access determination if the ACCC considers it
will not be in a position to make the final access determination
within six months of commencing the public inquiry into a proposal
to make the access determination.

Proposed subsection 152BCN(1) provides for the
variation and revocation of access determinations, by altering the
application of subsection 33(3) of the AIA. Absent proposed
subsection 152BCN(1), the effect of subsection 33(3) of that Act
would be that the power given to the ACCC in proposed section 152BC
to make access determinations includes a power exercisable in the
like manner and subject to the like conditions to repeal, rescind,
revoke, amend, or vary an access determination.

However, proposed subsection 152BCN(1)
provides that the operation of subsection 33(3) of the AIA is
changed in the manner specified in proposed subsections
152BCN(2)-(8).

The ACCC is not required to hold a public
inquiry into a proposal to vary an access determination where it
makes a minor variation or where all relevant carriers/CSPs and
access seekers have consented in writing to the variation.
Similarly, the ACCC is not required to hold a public inquiry about
revoking an access determination if all relevant carriers/CSPs and
access seekers have consented in writing to the revocation.

The ACCC is not under an obligation to
consider requests that it may receive to vary or revoke an access
determination, nor is it under an obligation to consider varying or
revoking an access determination for any other reason: proposed
subsection 152BCN(5).

Where the ACCC has commenced a public inquiry
into a proposal to vary an access determination, the ACCC can alter
the proposed variation that is the subject of the public inquiry
(proposed subsection 152BCN(6)). This is intended to ensure
that the ACCC’s conduct of inquiries is efficient and to
remove any suggestion that the ACCC must recommence a public
inquiry if it makes a change to the variation that it proposes to
make to an access determination after it has already commenced the
public inquiry.

If the ACCC alters the proposed variation
during the public inquiry, it must publish a notice of the
alteration in accordance with section 498 of the Tel Act, unless
the alteration is of a minor nature or each carrier/CSP and access
seeker whose interests are likely to be affected by the alteration
consent to it (proposed subsections 152BCN(7) and (8)).

Proposed subsection 152BCN(8) imposes a
requirement that, if the ACCC makes binding rules of conduct (see
proposed Division 4A of Part XIC) that relate to access to a
declared service and there is an access determination in force in
relation to that service, then the ACCC must commence an inquiry
under Part 25 of the Tel Act about a proposal to vary the access
determination in relation to that service within 30 days of making
the binding rules of conduct.

A public inquiry under Part 25 of the Tel Act
commences when the ACCC publishes the notice required under section
498 of that Act (see proposed section 152AI, inserted by item
127).

The public inquiry held by the ACCC is limited
to the proposal for variation that the ACCC puts forward. The
ACCC is not obliged to consider as part of its inquiry any other
issues, or any alternative or additional proposed variations, that
are brought forward by parties making submissions to the inquiry
(see proposed subsection 152BCN(5)).

Proposed
Subdivision D—Compliance with access
determinations

Proposed Subdivision D includes provisions
that have the effect of making compliance with an access
determination a condition of a carrier licence and a service
provider rule under the Tel Act. As such, a party’s
compliance with an access determination may be enforced by the ACCC
using the mechanisms available to it under that Act.

Proposed
section 152BCO Carrier licence
condition

Proposed section 152BCO sets out a carrier
licence condition requiring a carrier to comply with any access
determinations applicable to it.

The effect of proposed section 152BCO of
the CCA, together with proposed section 62A of the Tel Act, is
that a carrier must comply with an access determination, and that
failure to do so would render the carrier subject to the
enforcement provisions in the Tel Act relating to breach of carrier
licence conditions.

Proposed
section 152BCP Service provider
rule

Proposed section 152BCP of the CCA sets out a
service provider rule requiring a service provider to comply with
any access determinations applicable to it.

The effect of proposed section 152BCP of
the CCA, together with proposed subsection 98(3) of the Tel Act, is
that a service provider must comply with an access determination,
and that failure to do so would render the service provider subject
to the enforcement provisions in the Tel Act relating to breach of
service provider rules.

Proposed
Subdivision E—Private enforcement of access
determinations

In addition to enforcement of compliance with
access determinations by the ACCC or the Minister by means of
carrier licence conditions and service provider rules, dealt with
under proposed Subdivision D together with the enforcement
provisions of the Tel Act, access determinations may also be
enforced privately; i.e. one party to an access determination may
enforce the access determination against a person who is
contravening the access determination. Proposed Subdivision E
is based on Subdivision H of Division 8 of Part XIC (which is
repealed by item 185).

Proposed
section 152BCQ Private enforcement of access
determinations

Proposed section 152BCQ allows the parties to
an access determination to apply to the Federal Court for an order
relating to contravention of the access determination. If the
Court is satisfied that a person has engaged, is engaging, or
proposes to engage in contravention of an access determination, the
Court may make an order:

-
granting a restraining injunction (preventing a person from
engaging in conduct in contravention of an access
determination);

-
granting a mandatory injunction (requiring a person to do something
to ensure the person does not contravene an access
determination);

-
directing the person to compensate the applicant for loss or
damage; or

-
as the Court sees fit.

It is irrelevant whether an access
determination has expired; the remedies listed above are still
available with respect to contraventions of the access
determination that occurred while it was in force.

The Court may also make orders against any
other person involved in the contravention.

Proposed
section 152BCR Consent injunctions

Proposed section 152BCR provides a mechanism
for the Federal Court to grant an injunction in a situation where
the parties consent. In such a case, the Court does not need
to be satisfied that proposed section 152BCQ applies (i.e. it does
not need to be satisfied that a person has engaged, is engaging, or
proposes to engage in conduct in contravention of an access
determination).

Proposed
section 152BCS Interim injunctions

Proposed section 152BCS permits the Federal
Court to grant an interim injunction while it considers an
application for an injunction under proposed section
152BCQ.

The effect of proposed sections 152BCT and
152BCU is that the Federal Court can grant a restraining injunction
or a mandatory injunction requiring a person to do a thing
regardless of whether certain situations specified in proposed
paragraphs 152BCT(a)-(c) (for restraining injunctions) or
152BCU(a)-(c) (for mandatory injunctions) exist. This is
intended to give the Federal Court a wide power to grant
restraining and mandatory injunctions.

Proposed
section 152BCV Discharge or variation of
injunction or other order

Proposed section 152BCV provides that the
Federal Court can discharge or vary an injunction or order under
proposed Subdivision E.

Proposed
Subdivision F—Register of Access
Determinations

Proposed
section 152BCW Register of Access
Determinations

Proposed subsection 152BCW requires the ACCC
to maintain a register of all in-force access determinations, to be
known as the Register of Access Determinations.

The Register is required to be maintained by
electronic means, and to be made available for inspection on the
ACCC’s website. The Register is not a legislative
instrument for the purposes of the LIA. It is not appropriate
for the Register to be a legislative instrument, since it is simply
a collection of access determinations, which themselves are not
legislative instruments (see proposed subsection 152BC(9)).

Some of the material in access determinations
may be highly commercially sensitive, and inappropriate for
publication. For this reason, the ACCC is permitted to redact
particular provisions from access determinations if the ACCC is
satisfied that publication of the provisions could reasonably be
expected to prejudice substantially the commercial interests of a
person, and the prejudice outweighs the public interest in the
publication of the provisions. If it redacts a provision, the
ACCC must annotate the access determination to note that it has
made a redaction.

Proposed Division
4A—Binding rules of conduct

Proposed Division 4A of Part XIC provides for
the ACCC to make binding rules of conduct relating to access to a
declared service. Binding rules of conduct are intended to
enable the ACCC to urgently address problems relating to the terms
on which a declared service is supplied, and/or problems relating
to the way an access provider is complying with the standard access
obligations in relation to a declared service. Where an
access determination is in place, binding rules of conduct will
override it (to the extent of any inconsistency). Binding
rules of conduct can be made more quickly than an access
determination or a variation to an access determination.
There are additional limitations on the scope and duration of
binding rules of conduct, compared to the scope and duration of
access determinations.

The ACCC may only make binding rules of
conduct if it considers there is an urgent need to do so, where it
considers that there is insufficient time to go through the
processes set out in Division 4 for varying or making an access
determination. Binding rules of conduct permit the ACCC to
move quickly to adjust the terms and conditions that apply to
access to a declared service, on a temporary basis, while the ACCC
goes about the process of conducting an inquiry with a view to
putting in place or varying replacing the relevant access
determination.

Proposed
Subdivision A—Commission may make binding rules of
conduct

Proposed
section 152BD Binding rules of
conduct

Proposed subsections 152BD(1) and (2) provide
that the ACCC may make written rules relating to access to a
declared service, if it considers there is an urgent need to do so,
to be known as binding rules of conduct.

The possible subject matter of binding rules
of conduct is set out at proposed subsection 152BD(1).
Binding rules of conduct may:

- specify any or all of the terms and
conditions on which a carrier or CSP is to comply with the standard
access obligations that apply to that carrier/CSP in relation to a
particular declared service; or

- require a carrier or CSP to comply
with any or all of the standard access obligations applicable to
that carrier/CSP in a specified manner.

In contrast to access determinations, binding
rules of conduct are limited to addressing the terms and conditions
on which a declared service is supplied and the manner in which it
is supplied pursuant to the standard access obligations.
These matters are likely to be the most critical to the effective
and efficient supply of a declared service and, by addressing them,
the ACCC can quickly resolve urgent problems relating to access to
a declared service.

It is envisaged that the ACCC may need to make
urgent binding rules of conduct altering the application of an
access determination either to all carriers/CSPs and/or access
seekers, or to particular carriers/CSPs and/or access
seekers. For this reason, proposed subsections 152BD(3) and
(4) provide that binding rules of conduct may be of general
application, or may apply as limited in the rules, and specifically
that they may make different provision with respect to different
carriers/CSPs, or different access seekers, or different classes of
carriers/CSPs or access seekers. Proposed
subsection 152BD(7) clarifies that proposed subsection
152BD(4) does not, by implication, affect the operation of
subsection 33(3A) of the AIA, which provides that, where
legislation confers a power to make an instrument with respect to
particular matters, the power includes a power to make the
instrument with respect to only some of those matters or a class or
classes of those matters, and to make different provision with
respect to different matters or different classes of matters.

Binding rules of conduct may provide for the
ACCC to perform functions or exercise powers (proposed subsection
152BD(8)). This ensures that the ACCC has flexibility in how
it will deal with technical, complex and changing matters it needs
to include in provisions of access determinations. This
subsection corresponds to proposed subsection 152BC(7).

Proposed subsection 152BD(9) provides that
binding rules of conduct are not legislative instruments. For
reasons similar to those given in relation to access determinations
(in item 160), it is not appropriate for binding rules of conduct
to be subject to the tabling and disallowance requirements in the
LIA. It is not appropriate for binding rules of conduct to be
subject to the consultation requirements in the LIA because that
would prevent the ACCC from making them quickly to deal with urgent
issues. It is not necessary for binding rules of conduct to
be subject to the registration requirements in the LIA because the
ACCC will be required to maintain a public Register of Binding
Rules of Conduct. It is also not necessary for binding rules
of conduct to be subject to automatic sunsetting after ten years
under the LIA, because their maximum duration is only one year.

Proposed
section 152BDAA Matters that the Commission must
take into account

Proposed subsection 152BDAA(1) sets out a list
of matters that the ACCC must take into account when making binding
rules of conduct, and is the same as the list of matters set out at
proposed subsection 152BCA(1) that the ACCC must take into account
when making an access determination.

The effect of proposed subsection 152BDAA(2)
(which operates in a similar way to proposed subsection 152BCA(2))
is that, in making binding rules of conduct in relation to a
particular service that is provided by a carrier or CSP, the ACCC
can take into account relevant aspects of other eligible services
(as that term is defined in section 152AL) that are supplied by
that carrier or CSP. This provision is intended to ensure
that, in making binding rules of conduct that apply to a carrier or
CSP, the ACCC is not limited to considering the particular declared
service that the binding rules of conduct relate to in isolation,
but is able to consider it in the context of the other relevant
services which the carrier or CSP provides. For instance,
when specifying in binding rules of conduct the access price for a
declared service which is supplied by an access provider over a
particular network or facility, the ACCC can take into account not
only the access provider’s costs and revenues associated with
the declared service, but also the costs and revenues associated
with other services supplied over that network or facility.

Proposed subsection 152BDAA(3) clarifies that,
in making an access determination, the ACCC may take into account
other matters that it thinks are relevant.

Proposed subsection 152BDAA(4) sets up an
exception to the requirement for the ACCC to take certain matters
into account when making binding rules of conduct. The ACCC
is not required to take a matter into account if it would not be
reasonably practicable to do so, because of the urgent need to make
the binding rules of conduct.

Proposed subsection 152BDAA(5) similarly
provides that, when taking a matter into account in the process of
making binding rules of conduct, the ACCC is not required to obtain
information that it does not already have, if it would not be
reasonably practicable to do so, because of the urgent need to make
the binding rules of conduct.

These provisions acknowledge that binding
rules of conduct are intended to permit the ACCC to move quickly to
adjust the terms and conditions that apply to access to a declared
service, on a temporary basis, while the ACCC goes about the
process of conducting an inquiry with a view to putting in place or
varying replacing the relevant access determination.

Proposed
section 152BDA Restrictions on binding rules of
conduct

Proposed section 152BDA imposes certain
restrictions on the ACCC’s ability to make binding rules of
conduct, and is modelled on proposed section 152BCB, which relates
to limitations on the ACCC’s ability to make access
determinations.

Proposed subsection 152BDA(3A) imposes a
limitation on the ability of the ACCC to make binding rules of
conduct. This restriction would only apply if a final
migration plan is in force under the Tel Act: that is, if Telstra
has submitted to the ACCC a structural separation undertaking which
the ACCC has accepted, and that undertaking required Telstra to
submit a draft migration plan to the ACCC for its approval, which
Telstra has then submitted and the ACCC has then approved. In
these circumstances, the ACCC must not make binding rules of
conduct that would have the effect of requiring Telstra to engage
in conduct in connection with matters covered by its migration
plan. A similar limitation with respect to the making of
access determinations is made by proposed subsection
152BCB(3A). A detailed explanation of the operation of that
provision and the reason for it is provided above.

Carriers/CSPs and access seekers are free to
negotiate on, and agree to, terms of access to declared
services. If carriers/CSPs and access seekers settle on an
agreed arrangement for access to declared services, that
arrangement is called an access agreement. Access agreements
are dealt with in proposed Division 4B of Part XIC of the
CCA.

Proposed section 152BDB deals with the
situation where binding rules of conduct are inconsistent with an
access agreement between a carrier/CSP and an access seeker.
Section 152BDB provides a general rule that if binding rules of
conduct are applicable to a carrier/CSP and an access seeker, the
binding rules of conduct have no effect to the extent to which they
are inconsistent with an access agreement applicable to those
parties. In such a circumstance, the access to declared
services is governed by the agreement reached between the two
parties.

This provision is reflected in proposed
subsection 152AY, inserted by item 156, which establishes a
hierarchy for identifying the terms and conditions on which a
carrier/CSP must comply with the standard access obligations.

A note in proposed section 152AY alerts the
reader that, before considering the hierarchy that is set out at
proposed subsection 152AY(2), it is necessary to consider certain
listed provisions of Part XIC of the CCA that are inserted by the
Bill, and that specify how inconsistency is to be addressed,
including proposed section 152BDB.

Proposed
section 152BDC Duration of binding rules of
conduct

Binding rules of conduct must specify the date
on which they come into force, and an expiry date. The expiry
date must be within 12 months of the date the binding rules of
conduct were made. Binding rules of conduct may be revoked
before their expiry date.

Proposed section
152BDCA provides for final migration plans (see proposed
section 577BE in proposed Part 33 of the Tel Act, inserted by
item 30) to prevail over inconsistent binding rules of
conduct.

The effect of
proposed section 152BDCA is that, if a final migration plan is in
force, then binding rules of conduct have no effect to the extent
to which they would have the effect of:

- preventing Telstra from complying with
the final migration plan; or

- requiring Telstra to engage in conduct in
connection with matters covered by its final migration
plan.

The reason for this
limitation is to provide Telstra with a high level of certainty
that once its migration plan has been accepted by the ACCC, binding
rules of conduct (including those which may pre-date the final
migration plan) will not subsequently operate so as to impose
additional obligations on Telstra in relation to migration, or so
as to prevent Telstra from complying with its final migration plan.
Proposed subsection 152BDA(3A)) provides that, if a final migration
plan is in force, the ACCC must not make binding rules of conduct
that would have the effect of requiring Telstra to engage in
conduct in connection with matters covered by its migration
plan. Proposed section 152BDCA goes further: it also applies
to binding rules of conduct that are made by the ACCC before a
final migration plan comes into force. From the time a final
migration plan comes into force, binding rules of conduct have no
effect to the extent that they would have either of the effects
listed at proposed paragraphs 152BDCA(a) or (b).

If binding rules of conduct are limited to a
particular carrier/CSP or access seeker, the ACCC must give a copy
of them to that carrier/CSP or access seeker. (All binding
rules of conduct will be available on the Register of Binding Rules
of Conduct: see proposed Subdivision D of proposed Division
4A.)

Proposed
section 152BDE Access determinations that are
inconsistent with binding rules of conduct

Proposed section 152BDE provides for binding
rules of conduct to prevail over an access determination, to the
extent of any inconsistency (see also proposed
section 152AY).

The exception to this rule is that, where an
access determination contains a fixed principles provision, the
fixed principles provision will prevail over any binding rules of
conduct, to the extent of any inconsistency. This will
preserve the regulatory certainty provided by the inclusion of the
fixed principles provision in the access determination. Fixed
principles provisions are enabled by proposed
section 152BCD.

Proposed
section 152BDEA Stay of binding rules of
conduct

Proposed section 152BDEA mirrors the operation
of section 152DNB (which is repealed as a result of the amendment
to the CCA made by item 185 of the Bill), by providing that:

-
particular provisions of the Administrative Decisions (Judicial
Review) Act 1977 , which enable the Federal Court and the
Federal Magistrates Court to stay the operation of a decision that
is under judicial review until the completion of the judicial
review proceedings, do not apply to a decision of the ACCC to make
binding rules of conduct; and

-
the Federal Court must not stay a decision to make binding rules of
conduct while it finalises an application for a writ or injunction
under subsection 39B(1) of the Judiciary Act 1903 in
relation to such a decision.

This provision will ensure the effective
operation of Part XIC of the CCA during any legal challenge to
binding rules of conduct, and will go some way to removing an
incentive to challenge binding rules of conduct for tactical
reasons.

Proposed new section 152BCGA provides for a
similar provision in relation to access determinations.

Proposed
Subdivision B—Compliance with binding rules of
conduct

Proposed
section 152BDF Carrier licence
condition

Proposed
section 152BDG Service provider
rule

Proposed sections 152BDF and 152BDG set out a
carrier licence condition and a service provider rule requiring a
carrier/CSP to comply with any binding rules of conduct applicable
to it.

The effect of proposed sections 152BDF
and 152BDG of the CCA, together with proposed section 62B and
proposed subsection 98(3) of the Tel Act, is that a carrier/CSP
must comply with binding rules of conduct, and that failure to do
so would render the carrier/CSP subject to the enforcement
provisions in the Tel Act relating to breach of carrier licence
conditions or service provider rules.

Proposed
section 152BDM Discharge or variation of
injunction or other order

In addition to enforcement of compliance with
binding rules of conduct by the ACCC or the Minister by means of
carrier licence conditions and service provider rules, dealt with
under proposed Subdivision B together with the enforcement
provisions of the Tel Act, binding rules of conduct may also be
enforced privately; i.e. one party to an access determination may
enforce the access determination against a person who is
contravening the determination. Proposed Subdivision C of
proposed Division 4A includes proposed sections 152BDH-152BDM,
which mirror in operation the provisions in Subdivision E of
proposed Division 4 (relating to private enforcement of access
determinations). An explanation of the operation of those
provisions is provided at Subdivision E of Division 4 above.

Proposed
Subdivision D—Register of Binding Rules of
Conduct

Proposed
section 152BDN Register of Binding Rules of
Conduct

Proposed section 152BDN requires the ACCC to
maintain a register of all in-force binding rules of conduct, to be
known as the Register of Binding Rules of Conduct.

Proposed section 152BDN operates in the same
way as proposed section 152BCW, which provides for the Register of
Access Determinations, and is described above.

Proposed Division
4B—Access agreements

Carriers/CSPs and access seekers are free to
negotiate on, and agree to, terms of access to declared
services. If carriers/CSPs and access seekers settle on an
agreed arrangement for access to a declared service, that
arrangement is called an access agreement. Access agreements
are dealt with in proposed Division 4B of Part XIC of the
CCA.

Proposed
section 152BE Access agreements

For an agreement to be an access agreement, it
must meet the requirements for access agreements set out in
proposed subsection 152BE(1). A carrier/CSP and an access
seeker must be the parties to the agreement, and the agreement
must:

-
be in writing;

-
be legally enforceable (a non-binding arrangement between parties
would not suffice: although note the effect of proposed subsection
152BE(1A), described below);

-
relate to access to a declared service;

-
the agreement must address at least one of the subjects listed at
subparagraphs 152BE(1)(e)(i)-(xi).

The list of matters that may be addressed by
an access agreement at proposed subparagraph 152BE(1)(e)
corresponds with the list of possible topics for an access
determination (proposed subsection 152BC(3)). Access
agreements will enable access providers and access seekers to
negotiate and agree alternative access arrangements that are
mutually beneficial and provide more efficient outcomes than access
determinations. To give full effect to this objective, it is
appropriate that access agreements be able to cover the same range
of access-related matters as access determinations . Given
that the topic listed at subparagraph 152BE(1)(e)(xi) is that
an access agreement may deal with “any other matter relating
to access to the declared service” (in addition to the ten
specifically listed topics that precede that provision), the
requirement that an access agreement must deal with at least one of
the subject topics at paragraph 152BE(1)(e) does not operate to
limit the possible subject matter of an access agreement.

Proposed subsection 152BE(1A) provides that
the requirement in proposed paragraph 152BE(1)(b) that an
agreement must be legally enforceable, in order to be an access
agreement for the purposes of Part XIC of the CCA, does not apply
to an access agreement to the extent to which the agreement is
covered by proposed subparagraphs 152BE(1)(e)(ix) or (x).
Proposed subparagraphs 152BE(1)(e)(ix) and (x) permit an access
agreement to limit or restrict the application to a carrier/CSP of
obligations that are otherwise imposed on it by Part XIC of the
CCA, or to provide that they do not apply to that carrier/CSP,
either unconditionally or otherwise.

The intention of proposed subsection 152BE(1A)
is to avoid potential disputes over whether such provisions in an
access agreement are legally enforceable as between the parties to
the agreement, and therefore whether the agreement is an access
agreement for the purposes of Part XIC of the CCA, by providing
that the requirement for access agreements to be legally
enforceable does not apply to the extent they are covered by either
of these proposed subparagraphs. Proposed subsection
152BE(1A) does not affect the validity or the effectiveness of
provisions in an access agreement covered by proposed
subparagraphs 152BE(1)(e)(ix) and (x).

Proposed subsection 152BE(2) contains a
particular rule that applies to an agreement that is made
concerning access to an eligible service (defined in
section 152AL) that is not a declared service at the time that
the agreement is entered into, but that later becomes a declared
service. In such a case, if the agreement would have been an
access agreement if it had been entered into after the service
became a declared service (i.e. if all the other requirements of
proposed subsection 152BE(1) are satisfied), then the agreement
becomes an access agreement immediately after the eligible service
becomes a declared service.

To deal with the issue of variations being
made to an access agreement, proposed subsection 152BE(3) provides
that a reference to an access agreement in Part XIC includes a
reference to an access agreement as varied by another agreement
(called a ‘variation agreement’), so long as the
variation agreement is in writing and is legally enforceable.

Proposed subsection 152BE(4) provides that it
is immaterial whether an access agreement or variation agreement
was entered into before or after the commencement of proposed
section 152BE. The effect of this subsection is to confirm
that references in Part XIC to access agreements and variation
agreements cover both agreements of those kinds that were entered
into before the commencement of proposed section 152BE and
agreements of those kinds that are entered into after the
commencement of proposed section 152BE.

Proposed subsections 152BE(5) and (6) provide,
for the avoidance of doubt, that access agreements and variation
agreements respectively are not legislative instruments
(notwithstanding the fact that such agreements may, under proposed
subparagraphs 152BE(1)(e)(x) and (xi), affect the application of
obligations imposed by Part XIC of the CCA). As access
agreements represent private contractual arrangements between
parties, it would not be appropriate to treat them as legislative
instruments.

Proposed
section 152BEA Lodgment of access agreements with
the Commission

Proposed section 152BEA requires access
agreements to be lodged with the ACCC. The obligation is
imposed on the carrier/CSP who supplies, or who proposes to supply,
the service to which the access agreement relates. Compliance
with this requirement is a licence condition and service provider
rule (see proposed sections 152BEC and 152BED).

Access agreements will prevail over
inconsistent special access undertakings, binding rules of conduct
or access determinations to the extent of inconsistency (see
proposed section 152AY). It is therefore important that
the ACCC be aware of access agreements and of the terms and
conditions they contain, as this will assist the ACCC in carrying
out its regulatory functions under Parts XIB and XIC of the
CCA.

It should be noted that there is no
requirement that the ACCC approve any access agreement that is
lodged, and the fact that an agreement has been lodged with the
ACCC and the ACCC has made no comment about it is not intended to
confer any implicit regulatory approval for that agreement.

Proposed subsections 152BEA(1)-(3) set out the
time within which the carrier/CSP must lodge the access agreement
with the ACCC:

-
where the agreement is entered into after the commencement of
proposed section 152BEA, it must be lodged with the ACCC within 28
days after it is entered into;

-
where an agreement is entered into after the commencement of
proposed section 152BEA and that agreement becomes an access
agreement after the commencement of proposed section 152BEA
(because at the time the agreement is entered into, the service it
relates to is not a declared service, but at a later stage (after
the commencement of this section) it becomes a declared service),
the agreement must be lodged with the ACCC within 28 days after the
day it becomes an access agreement (worked out in accordance with
proposed subsection 152BE(2));

-
if a variation agreement (see proposed subsection 152BE(3)) -
whether the variation agreement varies an access agreement that was
entered into before the commencement of proposed section 152BE or
an access agreement that was entered into after the commencement of
proposed section 152BE - is entered into after the
commencement of proposed section 152BEA, the variation agreement
must be lodged with the ACCC within 28 days after it is entered
into.

In each case, the carrier/CSP may also be
required to give to the ACCC any further information about the
access agreement or variation agreement that is specified by the
ACCC. Proposed subsections 152BEA(4)-(7) provide that the
ACCC may specify information for that purpose. The ACCC can
require that the additional information provided to it be verified
by statutory declaration.

Proposed subsection 152BEA(10) clarifies, for
the avoidance of doubt, that an instrument made by the ACCC under
proposed subsections 152BEA(4)-(7) is not a legislative
instrument. The ACCC is required to publish such instruments
on its website (proposed subsection 152BEA(8)).

There may be occasions when a carrier/CSP
needs more than 28 days to provide the access agreement and the
other information to the ACCC: it may take the carrier/CSP some
time to collect the additional information it is required to
provide. To allow for this, the 28-day period allowed in each
case for the carrier/CSP to lodge the access undertaking can be
extended by the ACCC, before its expiry (proposed
subsection 152BEA(9)).

The operation of proposed section 152BEA does
not affect the ACCC’s power to obtain information, documents
and evidence under section 155 of the CCA (proposed subsection
152BEA(11)). This means, for example, that the ACCC could
rely on its information-gathering powers at section 155 to obtain
information concerning access agreements, or that the ACCC could
rely on those powers to obtain copies of access agreements that are
not required to be provided to it under proposed section 152BEA
(such as agreements entered into before the commencement of this
provision).

It is important that the ACCC be made aware
when access agreements cease to operate in advance of their
anticipated expiry date (for reasons similar to those set out at
section 152BEA above). For this reason, proposed section
152BEB requires that, where an access agreement has been given to
the ACCC in accordance with proposed section 152BEA and the access
agreement is terminated, rescinded or cancelled, a carrier/CSP who
has supplied the declared service under the access agreement must
notify the ACCC within 28 days. The obligation applies
equally to a carrier/CSP that, under an access agreement, had
proposed to supply access to a declared service but had not
actually supplied the declared service before the agreement was
terminated, rescinded or cancelled.

Proposed
section 152BEC Carrier licence
condition

Proposed
section 152BED Service provider
rule

Proposed section 152BEC sets out a carrier
licence condition requiring a carrier to comply with sections
152BEA and 152BEB, and proposed section 152BED sets out a
corresponding service provider rule.

The effect of proposed section 152BEC and
proposed subsection 152BED(2) of the CCA, together with proposed
section 62C and proposed subsection 98(5) of the Tel Act, is that a
carrier/CSP that supplies a declared service under an access
agreement must lodge copies of the agreement and any variation of
the agreement with the ACCC, and must notify the ACCC if the
agreement is terminated, rescinded or cancelled. Failure to
do so would render the carrier/CSP subject to the enforcement
provisions in the Tel Act relating to breach of carrier licence
conditions or service provider rules.

Item 161 - Subdivision A of Division
5 of Part XIC

Subdivision A of Division 5 of Part XIC deals
with ordinary access undertakings. Item 161 repeals the
Subdivision. Ordinary access undertakings will no longer be a
part of the telecommunications access regime. Only special
access undertakings will be available.

Ordinary access undertakings were intended to
promote regulatory certainty for access providers, by allowing them
to propose terms and conditions of access for a declared service
which would be compatible with their own operational and commercial
requirements. If the ACCC accepted an undertaking, it would
not be able to make an arbitration determination under
Division 8 of Part XIC that was incompatible with the
undertaking.

In practice, almost all undertakings submitted
to the ACCC since 1997 were rejected on the basis that they did not
promote the long-term interests of end-users. Ordinary access
undertakings have not only failed to promote regulatory certainty,
their use has resulted in significant regulatory uncertainty and
the allocation of considerable resources by the ACCC, access
providers and access seekers.

Under the reforms made to Part XIC by the
Bill, access providers will have the opportunity to make
submissions to the ACCC during a public inquiry into making an
access determination, concerning the terms and conditions of access
they would like to be included in the access determination, and the
ACCC will consider those submissions.

Item 162 - Subsection
152CBA(1)

Item 162 makes a change to subsection
152CBA(1) of the CCA. Section 152CBA deals with special
access undertakings, and provides that a person who is, or expects
to be, a carrier/CSP supplying either a listed carriage service or
a service that facilitates the supply of a listed carriage service
may give a written undertaking to the ACCC in relation to access to
the service, so long as the service is not an active declared
service.

‘Active declared service’ is
defined in subsection 152CBA(12), and has the same meaning as in
section 152AR (disregarding subsection 152AL(7)).

Item 162 amends subsection 152CBA(1) to
replace the term ‘active declared service’ with the
term ‘declared service’. The effect of this is
that special access undertakings will not be able to be lodged in
relation to any declared services. Special access
undertakings will only be able to be lodged in relation to services
for which a section 152AL declaration is not in force.

Where a service is a declared service, the
terms and conditions of access that apply to the service (if not
agreed between the access provider and access seeker in an access
agreement) will be the terms and conditions specified in an access
determination. For the reasons set out in item 161 relating
to the abolition of ordinary access undertakings, it is not
intended that undertakings should be able to deal with the terms of
access for declared services.

It should be noted that if a service is
covered by a special access undertaking and has not been declared
under subsection 152AL(3), the effect of subsection 152AL(7) is
that the service is only a declared service when it is supplied
by the person who lodged the undertaking - not when it is
supplied by any other person. (This is because subsection
152AL(7) provides that if a person has given the ACCC a special
access undertaking, the undertaking is in operation, and the person
supplies the service either to itself or to other persons, then
“the service supplied by the person is a declared
service” (emphasis added).) Therefore, a person will
still be able to lodge a special access undertaking in relation to
a particular type of service notwithstanding that the ACCC has
accepted a special access undertaking in relation to that type of
service from another person.

Item 163 - Before subsection
152CBA(4)

A special access undertaking enables a person
who invests in telecommunications facilities to obtain regulatory
certainty in respect of the telecommunications services the person
proposes to supply, by stating in the undertaking that the person
agrees to be bound by the standard access obligations in section
152AR in relation to the supply of the service and by setting out
in the undertaking the terms and conditions on which the person
proposes to supply the service in accordance with the standard
access obligations (subsection 152CBA(3)). If the ACCC
accepts the undertaking (under section 152CBC), the terms and
conditions in the undertaking will prevail over the terms and
conditions of access in an access determination and in binding
rules of conduct, to the extent of any inconsistency (proposed
sections 152CBIA and 152CBIB).

Proposed subsection 152CBA(3B) expands
the scope of special access undertakings: proposed paragraph
152CBA(3B)(a) enables the person lodging a special access
undertaking to state in the undertaking that the person will engage
in the conduct specified in the undertaking in relation to access
to the service that is the subject of the undertaking. This
proposed paragraph enables the person to undertake obligations
relating to providing access to the service that are additional to
the obligations contained in the standard access obligations.

If the person lodging the undertaking includes
a statement referred to in proposed paragraph 152CBA(3B)(a),
the person may, under proposed paragraph 152CBA(3B)(b),
specify the terms and conditions on which the person will engage in
the conduct relating to access specified under proposed
paragraph 152CBA(3B)(a).

Under subsection 152AL(7), a service that
is the subject of a special access undertaking that is being
supplied is a ‘declared service’. It is only
treated as a declared service in relation to the person who gave
the undertaking to the ACCC—that is, the standard access
obligations under section 152AR only apply to a service that is a
declared service by virtue of subsection 152AL(7) in relation to
the particular carrier or CSP that lodged the special access
undertaking with the ACCC . The standard access
obligations do not apply to all other carriers and CSPs who supply
a service of that kind.

This means that the ACCC can make an access
determination (under proposed section 152BC) or binding rules
of conduct (under proposed section 152BD) in relation to the
service (however, the access determination or binding rules of
conduct will only apply where the service is supplied by the
carrier or CSP who lodged the special access undertaking).

In the case where
the ACCC makes an access determination in relation to a service
that is a declared service because of the operation of subsection
152AL(7) (i.e. because the service is the subject of a special
access undertaking that has been accepted by the ACCC), the effect
of proposed section 152AY (described above) and of proposed
section 152CBIA (described below at item 174) is that the access
determination will only operate to the extent it includes
provisions about matters that are not addressed in the special
access undertaking. To the extent of any inconsistency
between the documents, the special access undertaking will
prevail. The same applies in relation to binding rules of
conduct: see proposed section 152CBIB (also at item 174,
below).

If the ACCC accepts the undertaking, any
requirement imposed by an access determination or binding rules of
conduct to provide access to the service (including a requirement
imposed under proposed paragraph 152BC(3)(e) or 152BD(3)(e)), and
any terms and conditions relating to access to the service imposed
by an access determination or binding rules of conduct (including
terms and conditions imposed under proposed paragraph 152BC(3)(f)
or 152BD(3)(f)), will not apply in relation to the service to the
extent that such requirement, or such terms and conditions, are
inconsistent with the undertaking.

Item 164 - Subsection
152CBA(10)

Item 164 repeals the current subsection
152CBA(10) and replaces it with a proposed new subsection
152CBA(10). The proposed new subsection 152CBA(10) does not
include a reference to ordinary access undertakings (which are
referred to in the current subsection 152CBA(10)). This
change is necessary as a result of the repeal of Subdivision A of
Division 5 of Part XIC.

Item 165 - Before subsection
152CBA(11)

Proposed subsection 152CBA(10A), inserted by
item 165, establishes that a special access undertaking may provide
for the ACCC to perform functions or to exercise powers in relation
to the undertaking, in accordance with the provisions of the
undertaking that confer those functions or powers on the
ACCC. This is intended to permit special access undertakings
to operate flexibly, by ensuring that an undertaking can provide
for the ACCC to make decisions on particular matters at a future
time. Similar amendments are made with respect to voluntary
undertakings under proposed Part 33 of the Tel Act and with respect
to the functional separation undertaking.

Item 166 - After section
152CBA

Item 166 inserts proposed section 152CBAA into
Part XIC of the CCA.

Proposed
section 152CBAA Fixed principles terms and
conditions

Proposed section 152CBAA provides that
‘fixed principles terms or conditions’, may be included
in a special access undertaking. Fixed principles terms and
conditions operate in a similar but slightly different manner to
fixed principles provisions in access determinations: see proposed
section 152BCD.

The person submitting a special access
undertaking to the ACCC can include in that undertaking a term or
condition that is specified to be a fixed principles term or
condition. The effect of specifying that a provision is a
fixed principles term or condition is to permit the person
submitting the undertaking to ‘lock in’ the matters
dealt with in that term or condition for a period (called the
‘notional fixed period’ in proposed subsection
152CBAA(1)). The notional fixed period must begin when the
undertaking comes into operation, and may end before, upon or after
the expiry time of the undertaking (proposed subsection
152CBAA(3)).

As explained above in the notes for proposed
section 152BCD, the way a fixed principles provision operates in
the context of access determinations is that, where a fixed
principles provision is included in an access determination
(‘the original access determination’), then:

-
any access determination that replaces the original access
determination must include a fixed principles provision in the same
terms as the fixed principles provision in the original access
determination; and

-
the nominal expiry date of the fixed principles provision in the
replacement access determination must be the same as or later than
the nominal expiry date of the fixed principles provision in the
original access determination.

There are some key differences between
proposed section 152BCD and fixed principles terms or conditions
under proposed section 152CBAA. Most notably, where a special
access undertaking (‘the original undertaking’) given
by a person in relation to a declared service is in operation and
includes a fixed principles term or condition with a certain
notional fixed period, then there is no requirement that any
later special access undertaking given to the ACCC must
contain the same fixed principles term or condition with the same
notional fixed period. Instead, it is up to the person who
gave the original undertaking to the ACCC to decide to whether to
include the same fixed principles term or condition with the same
notional fixed period in a later undertaking given by that person
to the ACCC in relation to that same declared service. The
effect of that person choosing to include that same fixed
principles term or condition in a later undertaking that the person
gives to the ACCC during the notional fixed period specified in the
original undertaking is that the ACCC must not reject the later
undertaking purely on the basis that:

- it includes that same fixed
principles term or condition; or

- it includes the same fixed
principles term or condition with a notional fixed period that is
either the same as or shorter than the notional fixed period in the
original undertaking (see proposed
paragraph 152CBAA(5)(h)).

It should be noted that proposed
subsection 152CBAA(5) has a recursive effect: if, in
accordance with this provision and section 152CBD (as amended by
later items of the Bill) the ACCC accepts a later undertaking that
includes a fixed principles term or condition with certain notional
fixed period, then that later undertaking (once accepted) would be
treated as the ‘original undertaking’ for the purposes
of considering the replacement of that undertaking by a further
undertaking.

A person giving an undertaking to the ACCC
that includes a fixed principles term or condition may specify
‘qualifying circumstances’ in relation to that fixed
principles term or condition (proposed subsection
152CBAA(2)). The qualifying circumstances set out the
conditions in which the restriction on the ACCC (i.e. the
requirement that it must not reject a later undertaking purely for
the reasons described above) does not apply ( see
proposed paragraphs 152CBAA(5)(f) and (g) ). This will
permit the ACCC to reject a later undertaking on the basis that it
includes a fixed principles term and condition, in certain
circumstances that are established up front and described in the
original undertaking. It is envisaged that the ACCC may
require a person giving it a special access undertaking that
includes fixed principles terms or conditions to set out qualifying
circumstances in relation to those fixed principles terms and
conditions, as a pre-condition to its accepting the undertaking
(see proposed subsection 152CBD(4), inserted by item 171).

If qualifying circumstances are specified in
relation to a fixed principles term or condition in an undertaking
that has been accepted by the ACCC, then the restriction on the
ACCC (i.e. the requirement that it must not reject a later
undertaking purely for the reasons described above, including that
the later undertaking includes the same fixed principles term or
condition) only applies where the same qualifying circumstances are
specified in the later undertaking in relation to the fixed
principle term or condition in that undertaking (see proposed
paragraph 152CBAA(5)(f)).

Proposed paragraphs 152CBAA(5)(i)-(k) change
the operation of section 152CBD (which sets out the circumstances
in which the ACCC may accept a special access undertaking), as it
applies to the ACCC’s consideration of a later undertaking
that includes the same fixed principles term or condition as an
earlier undertaking, where the notional fixed period for the fixed
principles term or condition under the earlier undertaking has not
expired, in order to give effect to the restriction on the ACCC
relating to the circumstances in which it may not refuse to accept
a later undertaking containing such a fixed principles term or
condition,

Item 167 inserts new paragraphs (aa)-(ac) into
subsection 152CBC(6), to take into account proposed section 152CBDA
(see item 172). Section 152CBC provides for the ACCC to
accept or reject a special access undertaking. In subsection
152CBC(5) the ACCC is given six months to consider a special access
undertaking. If it has not made a decision by the end of that
six-month period, it is taken to have accepted the
undertaking. Subsection 152CBC(6) sets out certain days that
are to be discounted in calculating the six-month period for the
purpose of subsection 152CBC(5); these are days during periods when
the ACCC is awaiting further information, or awaiting further
submissions, relevant to its consideration of an undertaking.
During such periods the ACCC may be unable to continue to consider
its decision on a special access undertaking, and it is appropriate
that the limited time given to the ACCC is suspended for the
duration of those periods. As a result of item 167,
three new types of days are included.

The first type of day involves the situation
where the ACCC gives a notice under proposed section 152CBDA (which
provides that the ACCC may give a notice to a person who has
submitted an undertaking, inviting the person to vary the
undertaking in accordance with the notice, and provide an amended
undertaking within a specified period), but the ACCC was not given
a varied undertaking. In this case, proposed paragraph
152CBC(6)(aa) provides that a day in the period specified in the
notice is to be disregarded in calculating the six month
period.

The second and third type of day involve the
situation where the ACCC gives a notice under proposed section
152CBDA and receives a varied undertaking in response.

The second type of day occurs where the ACCC
does not publish the varied undertaking under paragraph
152CBD(2)(d) (because the variations in question are of a minor
nature, or are unlikely to have a material adverse effect on a
person’s legitimate commercial interests: see proposed
subsection 152CBD(6), inserted by item 171). In that case,
for the purpose of calculating the six-month period, any day is to
be disregarded if it is in the period beginning on the day the ACCC
gave the notice and ending on the day the varied undertaking was
given to the ACCC in response to the notice.

The third type of day occurs where the ACCC
publishes the varied undertaking under paragraph 152CBD(2)(d)
(because the variations in question are not of a minor nature, or
are likely to have a material adverse effect on a person’s
legitimate commercial interests). In that case, for the
purpose of calculating the six-month period, any day is to be
disregarded if it is in the period beginning on the day the ACCC
gave the notice and ending on the day specified by the ACCC (under
paragraph 152CBD(2)(d)) as the deadline for making submissions when
it published the varied undertaking.

Item 168 - Paragraph
152CBC(6)(a)

Item 168 makes a consequential amendment to
paragraph 152CBC(6)(a), necessary as a consequence of the inclusion
of new paragraph 152CBC(6)(ac) by item 167.

Item 169 - After section
152CBC

Item 169 inserts proposed section 152CBCA into
Part XIC.

Proposed
section 152CBCA Serial
undertakings

Proposed section 152CBCA provides a mechanism
for the ACCC to refuse to consider serial undertakings. Where
the ACCC rejects one special access undertaking given to it by a
person, and the person subsequently gives the ACCC another special
access undertaking, and any or all of the provisions of the two
undertakings are materially similar, the ACCC can refuse to
consider the subsequent undertaking. This provision is
intended to ensure that the ACCC does not have to devote time and
resources to considering a special access undertaking that is
likely to be rejected.

Item 170 - After paragraph
152CBD(2)(c)

Item 170 inserts proposed paragraph
152CBD(2)(ca), the effect of which is to include an additional
requirement that must be satisfied in certain circumstances before
the ACCC may accept a special access undertaking.

The effect of proposed subsection 152CBA(3B)
(inserted by item 163) is to expand the scope of special access
undertakings.

Proposed paragraph 152CBD(2)(ca) has the
effect that, if a person lodging a special access undertaking with
the ACCC states in the undertaking that the person will engage in
the conduct specified in the undertaking in relation to access to
the service that is the subject of the undertaking, and specifies
the terms and conditions on which the person will engage in the
conduct, then the ACCC must not accept the undertaking unless it is
satisfied that the conduct referred to will promote the long-term
interests of end-users of carriage services or of services supplied
by means of carriage services, and that the terms and conditions
referred to are reasonable.

Item 171
- At the end of section 152CBD

Item 171 inserts proposed subsections
152CBD(3)-(6).

Proposed subsection 152CBD(4) sets out
additional circumstances in which the ACCC must refuse to accept a
special access undertaking. The additional circumstances all
relate to special access undertakings that include fixed principles
terms or conditions (see proposed section 152CBAA). If the
ACCC is given a
special access undertaking that provides that certain terms or
conditions of that undertaking are fixed principles terms or
conditions, for a specified notional fixed period, the ACCC must
reject the undertaking if any of the following applies:

- the ACCC considers that a term or
condition that has been nominated as a fixed principles term or
condition should not be a fixed principles term or
condition;

- the ACCC considers that a different
period should be set as the notional fixed period;

- the undertaking specifies qualifying
circumstances for the fixed principles terms or conditions, and the
ACCC does not consider those circumstances should be qualifying
circumstances for those fixed principles terms or
conditions;

- the undertaking does not specify
qualifying circumstances for the fixed principles terms or
conditions, and the ACCC considers that certain circumstances
should be qualifying circumstances for those fixed principles terms
or conditions.

As noted above in the explanation for proposed
subsection 152CBAA(5), it is envisaged that the ACCC may require a
person giving it a special access undertaking that includes fixed
principles terms or conditions to set out qualifying circumstances
in relation to those fixed principles terms and conditions, as a
pre-condition to its accepting the undertaking.

Proposed subsection 152CBD(3) and (5) clarify
that subsection 152CBD(2) (which sets out the circumstances in
which the ACCC may accept a special access undertaking) and
subsection 152CBD(4) (respectively) have effect subject to proposed
subsection 152CBAA(5), which limits the ACCC’s ability
to reject special access undertakings which contain fixed
principles terms or conditions.

The effect of proposed subsection 152CBD(6) is
that the ACCC is not required to publish (in accordance with
paragraph 152CBD(2)(d)) a varied undertaking given to the ACCC
under proposed section 152CBDA unless the ACCC is satisfied that
the variations in question are not of a minor nature, or are likely
to have a material adverse effect on a person’s legitimate
commercial interests. This is intended to ensure that the
ACCC does not have to go through a publication and consultation
process on a varied undertaking given to it if the variations are
only minor.

Item 172 - After section
152CBD

Item 172 inserts proposed section 152CBDA,
which provides a mechanism for the ACCC to give a notice to a
person who has submitted an undertaking, inviting the person to
vary the undertaking in accordance with the notice.

Proposed
section 152CBDA Variation of special access
undertaking

Proposed section 152CBDA enables the ACCC to
suggest to a person who has given it a special access undertaking
that the person make specified variations to the undertaking.
This provision is designed to avoid a situation where the ACCC has
to reject a special access undertaking, resulting in the person who
lodged it having to start the whole process again by lodging a new
undertaking, and instead allows the ACCC to propose variations to
an access undertaking it is given. If the ACCC decides to
give a notice to a person who has submitted an undertaking,
inviting the person to make specified variations to the
undertaking, the ACCC must nominate a period for the person to
provide a varied undertaking. If the person provides the
varied undertaking to the ACCC within the specified period, the
ACCC must then consider the varied undertaking under section
152CBC.

The ACCC is not under a duty to consider
whether to give a notice to a person who has submitted an
undertaking to it (proposed subsection 152CBDA(4)).

Item 173 - After subsection
152CBG(4)

Item 173 inserts proposed subsection
152CBG(4A), the effect of which is to make subsection 152CBG(4)
(which concerns the variation of access undertakings) subject to
proposed subsection 152CBAA(6), which contains rules preventing the
ACCC from refusing to accept, on certain grounds, variations to
special access undertakings that contain fixed principles terms or
conditions, during the notional fixed period for those fixed
principles terms or conditions.

The effect of proposed sections 152CBIA and
152CBIB is that a special access undertaking prevails over an
access determination, or over binding rules of conduct, to the
extent of any inconsistency (see proposed section 152AY).

By contrast, proposed section 152CBIC provides
that an access agreement prevails over a special access
undertaking, to the extent of any inconsistency. This
reflects the intention that parties should be free to agree terms
of access.

Item 175
- Subsection 152CC(2)

Item 176
- Subsections 152CC(3), (4) and (5)

Items 175 and 176 amend section 152CC, which
provides that the ACCC must maintain a register of access
undertakings that have been accepted by the ACCC (including those
that are no longer in force). The amendments bring section
152CC into line with proposed sections 152BCW (which relates to the
Register of Access Determinations) and 152BDN (which relates to the
Register of Binding Rules of Conduct), by requiring that the ACCC
is to maintain the register of access undertakings by electronic
means, and make it available for inspection on the ACCC website,
and providing that the Register is not a legislative
instrument. The amendments made to section 152CC also reflect
the amendments made to section 152CJ by items 183 and 184.

Item 177 - Sections 152CE, 152CF,
152CG and 152CGA

Item 177 repeals sections 152CE, 152CF, 152CG
and 152CGA, which relate to the review by the Australian
Competition Tribunal of a decision of the ACCC to accept or reject
an access undertaking or a variation to an access
undertaking. Consistent with other changes made by the Bill
to the operation of Part XIC, merits review of decisions of the
ACCC relating to access undertakings will no longer be
available.

Merits review of the ACCC’s decisions to
accept or reject an access undertaking is being removed for similar
reasons to those set out in the notes on item 152.

Item 178 - Section 152CGB

Item 178 repeals section 152CGB, as a
consequence of the repeal of Division 8 of Part XIC by item
185.

Item 179
- Subsection 152CH(1) (notes 1A, 1B, 2 and 3)

Item 180
- Subsection 152CH(1) (note 5)

Item 181
- Subsection 152CH(1) (note 6)

Items 179 and 181 repeal notes 1A, 1B, 2, 3
and 6 in subsection 152CH(1), and item 180 repeals and
replaces note 5 with notes 5 and 5A in the same subsection, as a
result of amendments made elsewhere in the Bill.

Item 182 - Subsection
152CI(2)

Item 182 repeals current subsection 152CI(2),
which deals with the situation where a provision of the
telecommunications access code is inconsistent with a Ministerial
pricing determination (made under section 152CH). The
telecommunications access code is dealt with in Division 4 of
Part XIC, which is being repealed by item 160.

Item 182 substitutes new proposed subsections
152CI(2) and (3), which provide that a provision of an access
determination or of binding rules of conduct that is inconsistent
with a Ministerial pricing determination has no effect to the
extent of the inconsistency.

Item 183 - Subsection
152CJ(2)

Item 184 - Subsections 152CJ(3), (4),
and (5)

Items 183 and 184 amend section 152CJ, which
provides that the ACCC must maintain a Register of Ministerial
pricing determinations. The amendments bring section 152CJ
into line with proposed sections 152BCW (which relates to the
Register of Access Determinations) and 152BDN (which relates to the
Register of Binding Rules of Conduct), by requiring that the ACCC
is to maintain the Register of Ministerial pricing determinations
by electronic means, and make it available for inspection on the
ACCC website.

Proposed subsection 152CJ(4) provides that the
Register is not a legislative instrument.

The amendments made to section 152CJ also
reflect the amendments made to section 152CC by items 175 and
176.

Item 185 - Division 8 of Part
XIC

Item 185 repeals Division 8 of Part XIC, which
provides for the resolution of disputes about access. Under
Division 8, carriers/CSPs and access seekers can notify access
disputes to the ACCC. The ACCC is then required to arbitrate
the access dispute, and make an arbitration determination, setting
out the terms and conditions of access to the service.

In practice, the operation of Division 8 has
proven to be complex and prone to excessive delays. Although
Division 8 was intended to encourage negotiation between access
providers and access seekers, in general terms it has been a major
source of regulatory uncertainty and delay.

One of the fundamental reforms to the
telecommunications access regime made by the Bill is to replace the
power of the ACCC to arbitrate access disputes with a power for the
ACCC to set up front terms and conditions of access in an access
determination. On this basis, Division 8 of Part XIC is being
repealed.

Item 186 - Division 9 of Part
XIC

Item 186 repeals Division 9 of Part XIC, which
provides for the registration of agreements for access to declared
services. Division 9 is superseded by proposed Division 4B,
dealing with access agreements.

Item 187 - Paragraph
152EF(1)(b)

Item 187 makes an amendment to section 152EF,
which provides that certain persons must not engage in conduct for
the purpose of preventing the fulfilment of a standard access
obligation or of an obligation imposed by a determination made by
the ACCC under Division 8. As a result of the repeal of
Division 8 by item 185, and the introduction of proposed Divisions
4 and 4A, item 187 replaces the reference in section 152EF to
‘an obligation imposed by a determination made by the
Commission under Division 8’ with references to requirements
imposed by an access determination, or by binding rules of
conduct.

Item 188 - Subparagraph
152ELA(3)(a)(i)

Item 189 - Subparagraph
152ELA(3)(a)(ii)

Item 190 - Subparagraph
152ELA(3)(a)(iii)

Item 191 - Paragraph
152ELA(3)(b)

Item 192 - Paragraph
152ELA(3)(c)

Item 193 - Paragraph
152ELA(3)(d)

Items 188-193 make consequential amendments to
subsection 152ELA(3), which provides for the matters that may be
dealt with by Procedural Rules made by the ACCC under subsection
152ELA(1), that are necessary as a result of the repeal of section
152AT and Division 8 of Part XIC.

Item 194 - Subsections 152ELA(6) and
(7)

Item 194 makes an amendment to section 152ELA,
repealing subsections 152ELA(6) and (7), and substituting proposed
subsection 152ELA(6). This amendment is necessary as a result
of the repeal of Division 8 of Part XIC.

Proposed section 152ELD provides that the
Commonwealth must pay a reasonable amount of compensation to a
person where the operation of Part XIC, or of the transitional
provisions in Division 2 of Part 2 of Schedule 1 to the Bill, would
result in an acquisition of property from the person within the
meaning of paragraph 51(xxxi) of the Constitution otherwise than on
just terms (i.e. without the person being sufficiently
compensated). The amount of compensation is that either
agreed by the person and the Commonwealth or, failing agreement,
that determined by a court of competent jurisdiction.

This provision is similar in operation to
section 152EB, which falls within Division 8 of Part XIC and as
such is being repealed by item 185.

Item 196 makes a consequential amendment to
the definition of ‘protected information’ in subsection
155AAA(21) of the CCA, to remove two references to provisions of
Part XIC that are being repealed by other items in the Bill.

Item 197
- Subsection 171B(1)

Item 197 makes a consequential amendment to
section 171B of the CCA, which provides that Division 3 of Part
IIIA and Division 8 of Part XIC have no effect to the extent (if
any) to which they purport to confer judicial power on the
ACCC. As a result of the repeal of Division 8 of Part XIC by
item 185, section 171B is amended to remove reference to that
Division. The heading to section 171B is also appropriately
amended.

Division 2—Transitional
provisions

Division 2 of Part 2 of Schedule 1 to the Bill
includes transitional provisions necessary to give effect to the
amendments made by Division 1 of Part 2.

Item 198 - Definitions

Item 198 provides that definitions for certain
terms used in Division 2 of Part 2 of Schedule 1 to the Bill have
the same meaning as in Part XIC of the CCA, as amended by Division
1.

Items 199-201 are transitional provisions to
deal with certificates issued by the ACMA under Part 5 of Schedule
1 to the Tel Act stating that, in the ACMA’s opinion, it is
not technically feasible for a carrier to comply with the rule at
subclauses 33(1), 34(1) or 35(1) requiring the carrier to provide
access to certain facilities to another carrier on request.
As a result of changes made by items 98-101, 103-106 and
108-111 of the Bill, the ACCC, rather than the ACMA, will
have the responsibility for issuing those certificates. The
effect of these items is that any certificates that have been
issued by the ACMA before the commencement of this item are to be
treated, after the commencement of these items, as if they had been
issued by the ACCC: that is, they continue to operate under the
provisions of Part 5 of Schedule 1 to the Tel Act as amended by the
Bill.

Items 202 and 203 achieve this by providing
for the continued application of certain provisions in Part XIC
that are repealed by Division 1 of Part 2 of the Schedule to the
Bill. In each case, the continued application of those
provisions is subject to the operation of the rest of the item.

The reference to “the first access
determination” means the first final access determination
concerning the declared service to which the exemption relates or,
if an interim access determination is made in relation to the
declared service, that interim access determination.

At the time when the ACCC is making the first
access determination, it will be able to include provisions under
proposed paragraphs 152BC(3)(h) or (i) limiting the
application of the standard access obligations. Such
provisions may have a similar effect to exemptions.

Item 204 -
Transitional—ordinary access undertakings given to the
Commission before 15 September 2009

Item 204 achieves this by providing for the
continued application of certain provisions in Part XIC that are
repealed by Division 1 of Part 2 of the Schedule to the Bill.
The continued application of those provisions is subject to the
operation of the rest of item 204.

Subitem 204(5) mirrors the effect of proposed
section 152CBIC of Part XIC (see item 174) by providing that
an access agreement (under proposed Division 4B of Part XIC)
prevails over an undertaking to the extent of any
inconsistency.

Item 205
- Transitional—ordinary access undertakings given to
the Commission on or after 15 September 2009

Item 205 provides for the continued effect of
ordinary access undertakings that are given to the ACCC on or after
15 September 2009 (being the date the 2009 Bill was introduced into
the Parliament) and that are accepted by the ACCC before the
commencement of item 205, in spite of various amendments made by
Division 1, but only until the first access determination
concerning the relevant declared service comes into force.
Item 205 will commence on the day after the Bill receives the
Royal Assent: see clause 2.

Item 205 achieves this by providing for the
continued application of certain provisions in Part XIC that are
repealed by Division 1 of Part 2 of the Schedule to the Bill.
The continued application of those provisions is subject to the
operation of the rest of item 205.

Subitem 205(6) mirrors the effect of proposed
section 152CBIC of Part XIC (see item 174) by providing that
an access agreement (under proposed Division 4B of Part XIC)
prevails over an undertaking to the extent of any
inconsistency.

Item 206 -
Transitional—continuity of special access
undertakings

Item 206 provides a transitional provision to
deal with special access undertakings, ensuring that the amendment
to subsection 152CBA(1) of the CCA (made by item 162 of
Schedule 1 to the Bill) does not affect the continuity of a special
access undertaking that is in operation before the commencement of
this item. The amendment to subsection 152CBA(1) will have
the effect that special access undertakings will not be able to be
lodged in relation to any declared services.

Item 207
- Transitional—arbitration of access disputes

Item 207 provides for the ACCC to have a
continued role in arbitrating access disputes notified to it under
Division 8 of Part XIC of the CCA, in certain specified limited
circumstances, notwithstanding the repeal of Division 8 by Division
1 of Part 2 of Schedule 1 of the Bill. This provision is
necessary to enable the transition from the current
negotiate/arbitrate model in Part XIC to the model of setting
up-front terms and conditions that is implemented by the changes
made to Part XIC by the Bill.

Item 207 provides for the continued role of
the ACCC in arbitrating certain access disputes by providing for
the continued application of certain provisions in Part XIC that
are repealed by Division 1 of Part 2 of the Schedule to the
Bill. The continued application of those provisions is
subject to the operation of the rest of item 207.

The ACCC will have 12 months from the
commencement of Part 2 of Schedule 1 to the Bill to commence the
process of making an access determination for any service that is a
declared service at the commencement of proposed
section 152BCI (see proposed subsection 152BCI(2)).
Until the ACCC makes the first final access determination for an
existing declared service, access disputes may still be referred to
the ACCC under Division 8 of Part XIC.

Item 207 sets out the circumstances in which,
and the period for which, access disputes will still be able to be
referred to, and arbitrated by, the ACCC under Division 8 of
Part XIC after the commencement of item 207, and the order of
precedence between arbitration determinations made by the ACCC
under that Division vis-Ã -vis access determinations and
binding rules of conduct. The effect of item 207 is as
follows:

­ Access
disputes about a service that is declared after the commencement of
item 207 cannot be referred to the ACCC for arbitration.

­ Access
disputes about a service that was declared before the commencement
of item 207 can be referred to the ACCC for arbitration until the
first final access determination is made in relation to the
declared service.

­ If:

o there is
an access agreement in force between Telstra and an NBN corporation
relating to access to a declared service; and

o that
access agreement was entered into before the first final access
determination in relation to that service comes into force; and

o that
agreement is specified in an in-force structural separation
undertaking (see proposed section 577A of the Tel Act, inserted by
item 30 of Schedule 1 to the Bill);

then neither Telstra nor the NBN corporation is able to refer an
access dispute about the service to the ACCC for arbitration.

(Given the importance to the structural reform of the
telecommunications industry of any arrangements that may be agreed
between Telstra and NBN Co in relation to migration of customers,
this will ensure that those arrangements are not made subject to
arbitration under Division 8 of Part XIC (as continued by
item 207) .)

­ The ACCC
may terminate an arbitration proceeding at any time (without making
an arbitration determination) after the ACCC commences a public
inquiry about making an access determination in relation to the
declared service that is the subject of the arbitration
proceeding. (This is to avoid the ACCC having to continue
with an arbitration where it intends to consider the issues in
dispute in the arbitration during the public inquiry process, with
a view to addressing the issues in the access determination.)

­ A final
arbitration determination made by the ACCC after the commencement
of item 207 must specify an expiry date.

­ An
arbitration determination that has an expiry date prevails over a
final access determination, to the extent of any inconsistency.

­ An access
determination prevails over an arbitration determination that does
not have an expiry date, to the extent of any inconsistency.

­ An
arbitration determination, whether or not it has an expiry date,
prevails over an interim access determination, to the extent of any
inconsistency.

­ Binding
rules of conduct prevail over an arbitration determination that
does not have an expiry date, to the extent of any
inconsistency.

­ An
arbitration determination that has an expiry date prevails over
binding rules of conduct, to the extent of any inconsistency.

­ An access
agreement:

o that
relates to a declared service; and

o that is
entered into after the first final access determination in relation
to that declared service comes into force;

prevails over an arbitration determination made in relation to that
declared service, to the extent of any inconsistency.

­ An
arbitration determination relating to a declared service prevails
over an access agreement relating to that declared service that is
entered into before the first final access determination relating
to that declared service comes into force, to the extent of any
inconsistency.

Item 208 establishes a hierarchy, similar to
current section 152AY and proposed section 152AY, for identifying
the terms and conditions on which a carrier/CSP must comply with
the standard access obligations.

The reference to ‘access
undertaking’ in paragraph 155(2)(b) refers to the ordinary
access undertaking mentioned in subparagraph 155(1)(b)(ii) (that
is, an ordinary access undertaking which has continued effect by
virtue of item 204 or 205).

Two notes are included at the end of item 208
to assist the reader.

The first note alerts the reader that, before
considering the hierarchy that is set out at item 208, it is
necessary to consider certain listed provisions of Part XIC that
are inserted by the Bill, and other items in Division 2 of Part 2
of Schedule 1 to the Bill, that specify how inconsistency is to be
addressed. For example, subitem 207(10) provides that binding
rules of conduct that are inconsistent with an arbitration
determination under Division 8 that has an expiry date have no
effect, to the extent of the inconsistency. So if binding
rules of conduct and a determination under Division 8 that has
an expiry date both provide terms and conditions dealing with a
particular matter, in considering the application of the hierarchy
at item 208 in such a circumstance, in effect the binding rules of
conduct are taken not to address the matter: they have no effect to
the extent of the inconsistency.

The second note highlights that although,
under the hierarchy described above, binding rules of conduct take
precedence over an access determination, the ACCC may only make
binding rules of conduct if it considers there is an urgent need to
do so. As noted above, binding rules of conduct are intended
to deal with urgent matters. They have a maximum duration of
12 months. It is expected that access determinations will be
the usual way that the ACCC specifies up-front terms and conditions
of access, including terms and conditions for complying with the
standard access obligations.

Item 209
- Transitional—hindering the fulfilment of an
obligation imposed by an arbitration determination

Item 209 provides a transitional mechanism
permitting section 152EF of the CCA to continue to apply to any
obligations imposed by determinations made by the ACCC under
Division 8 of Part XIC that continue to operate as a result of
these transitional provisions, in spite of the repeal of that
Division by the Bill.

Item 210
- Transitional—regulations

Item 210 provides that the Governor-General
may make regulations in relation to transitional matters arising
out of amendments made by Part 2 of Schedule 1 to the Bill.

Part
3—Anti-competitive conduct

Part 3 of Schedule 1 to the Bill amends the
anti-competitive conduct provisions in Part XIB of the CCA. Part 3
streamlines the enforcement process that the ACCC is required to
follow, and clarifies that the competition notice regime applies to
content services delivered by carriers and CSPs.

Division 1 - Amendments

Competition and Consumer Act
2010

Item
211 - At the end of section 151AF (before the
note)

Item 211
amends section 151AF of the CCA to include ‘content
services’ in the list of goods and services that are a part
of a telecommunications market. Section 151AF of the CCA currently
lists carriage services, goods or services for use in connection
with a carriage service and access to facilities as being part of a
telecommunications market. The term ‘content services’
is defined in section 151AB of the CCA as having the same meaning
as in the Tel Act. Section 15 of the Tel Act provides that a
‘content service’ includes a broadcasting service, an
on-line information service, an on-line entertainment
service, any other on-line service, or any other service specified
by the Minister in a determination.

The term
‘content services’ is used in Parts XIB and XIC of the
CCA, including section 151BUAAA (this section is being repealed by
Part 1 of Schedule 1 to the Bill), subsection 152AF(1) (access by a
service provider to a declared service), and section 152AR (supply
of an active declared service, permitted interconnection and
conditional-access customer equipment).

Part XIB of the CCA sets out a telecommunications specific
anti-competitive conduct regime. Telecommunications carriers
and CSPs are prohibited from engaging in anti-competitive
conduct. The circumstances in which a carrier or a CSP
engages in anti-competitive conduct relate to conduct in a
‘telecommunications market’. If the ACCC believes
that a carrier or CSP is engaging in anti-competitive conduct in a
telecommunications market, it may issue a competition notice under
Part XIB.

The intention of the amendment is to clarify that the
anti-competitive conduct provisions in Part XIB of the CCA apply to
content services supplied by carriers and CSPs in telecommunication
markets. This will ensure that the ACCC is able to take
enforcement action without doubt over the application of Part XIB
to content services.

Item
212 - Subsections 151AKA (9) and (10)

Item 212
repeals current subsections 151AKA(9) and (10) (including the
note), which provide for specific consultation to take place before
issuing a Part A competition notice, and inserts proposed
subsection 151AKA(9) and an accompanying note in their
place.

Current
subsections 151AKA(9) and (10) require the ACCC, before it issues a
Part A competition notice, to give the carrier/CSP concerned a
consultation notice which describes the alleged anti-competitive
conduct in summary form, and gives the carrier/CSP an opportunity
to make submissions. Repealing these subsections provides for
a more streamlined process for issuing competition notices, to
enable the ACCC to move quickly to issue a competition notice as
soon as it has reason to believe anti-competitive conduct is
occurring in the telecommunications market.

Proposed
subsection 151AKA(9) expressly removes any common law procedural
fairness requirements that may apply to the ACCC when issuing a
Part A competition notice. This provision is intended to
eliminate the opportunity of a recipient of a notice from appealing
the issuing of the notice on procedural fairness grounds at this
stage of the process.

A s
a competition notice does not of itself direct a party to take
action, there are no penalties for failing to comply with a
competition notice. Before penalties are applied for engaging
in anti-competitive conduct, the ACCC has to prove to the Federal
Court that the anti-competitive conduct has occurred.

Division 2 - Application

Item
213 - Application - competition notices

Item 213
clarifies that the proposed amendments to section 151AKA of the CCA
made by the Bill will only apply to Part A competition notices
issued after the commencement of this item.

Part 4—Universal service
regime

Part 4 of Schedule 1 to the Bill amends the
Consumer Protection Act to include new requirements for a primary
universal service provider to supply, on request, standard
telephone services with characteristics and which comply with
performance standards determined by the Minister. There are also
new provisions providing minimum performance benchmarks that a
primary universal service provider must meet in fulfilling its
responsibilities.

Part 4 of Schedule 1 to the Bill also provides
the Minister with the power to specify, by written determination,
rules and performance standards to which a primary universal
service provider must adhere in relation to the supply,
installation, maintenance and location of payphones, new rules in
relation to public consultation and notification of proposals to
remove payphones, and provides for the ACMA to have new powers to
direct the universal service provider not to remove payphones.

Item 214 inserts a definition of a
‘payphone carriage service’ into subsection 5(2)
of the Consumer Protection Act. This term is proposed to be used in
item 225 which inserts revised obligations on primary universal
service providers in regard to payphones.

Item 215 inserts a definition of
‘price-related terms and conditions’ into
subsection 5(2) of the Consumer Protection Act. This
definition has been relocated from subsection 150(3) (see item
226). The term is now used more widely in Part 2 of the Consumer
Protection Act as a result of the amendments proposed under item
225 which enable non-price-related obligations to be placed on
primary universal service providers in regard to standard telephone
services provided in fulfilment of the USO. The Minister’s
powers to determine price-related terms and conditions, under
Division 11 of Part 2 of the Consumer Protection Act in relation to
USO services, and under Part 9 of the Consumer Protection Act in
relation to price control arrangements for carriage services,
content services and facilities supplied by Telstra, remain
unchanged.

Item 216 inserts a definition of ‘VOIP
service’ into subsection 5(2) of the Consumer Protection Act
to mean a carriage service that enables a voice call to originate
on customer equipment by means of the internet protocol. The
term ‘internet protocol’ refers to the method by which
data is sent from one computer to another on the internet. A
definition for ‘VOIP service’ is required as a result
of the amendments proposed under item 217.

Proposed
section 6A When a standard telephone
service is supplied in fulfilment of the universal service
obligation

Proposed section 6A clarifies when standard
telephone services are taken to be supplied in fulfilment of the
USO and when those services are taken not to have been provided in
fulfilment of the USO. This clarity is required to assist consumers
become more aware of the status of the service they are purchasing
and their right to a service supplied in fulfilment of the USO.

Proposed section 6A is intended to enable a
primary universal service provider to clearly delineate between
those services it provides in fulfilment of the USO and its other
standard telephone service offerings. The provisions in proposed
section 6A are intended to establish a presumption that standard
telephone services supplied by a primary universal service provider
which are not mobile or VOIP technologies are subject to the
universal service requirements unless the customer agrees
otherwise.

Proposed subsection 6A(1) clarifies that in
order for a standard telephone service that is a public mobile
telecommunications service (defined in section 32 of the Tel
Act) or a VOIP service, to be taken to be supplied in
fulfilment of the USO, the primary universal service provider must,
before the customer enters into an agreement with it for the supply
of the service:

-
provide the customer with a written notice that the service is
supplied in fulfilment of the USO; and

-
the written notice must comply with the requirements (if any)
specified in a determination under proposed subsection 6A(2).

Proposed subsection 6A(2) provides that the
ACMA may, by legislative instrument, determine requirements for the
purposes of proposed paragraph 6A(1)(d).

Proposed subsection 6A(3) clarifies that a
standard telephone service, that is not a public telecommunications
service or a VOIP service, is taken not to be supplied in
fulfilment of the USO in circumstances where, before the customer
enters into an agreement with it for the supply of the service:

-
the primary universal service provider in question gives the
customer the option of being supplied with another standard
telephone service on the basis that the other service would be
supplied in fulfilment of the USO; and

-
the customer has given the provider a written notice acknowledging
that the relevant service is not supplied in fulfilment of the USO;
and

-
the written notice complies with the requirements (if any)
specified in a determination under proposed subsection 6A(4).

Proposed subsection 6A(4) provides that the
ACMA may, by legislative instrument, determine requirements for the
purposes of proposed paragraph 6A(3)(e).

Item 218
- After section 8B

Item 218 inserts proposed section 8BA into the
Consumer Protection Act, which provides a special meaning of
‘standard telephone service’ for the purposes of Part 2
of that Act.

Proposed
section 8BA Special meaning of standard
telephone service

Pursuant to proposed subsection 8BA(1),
‘standard telephone service’ would include the meaning
that is provided for under section 6 of the Consumer Protection Act
plus any additional characteristics that have been specified by the
Minister under a subsection 8BA(2) instrument.

Proposed subsection 8BA(2) allows the
Minister, by legislative instrument, to determine specified
characteristics for the purposes of proposed subsection 8BA(1).

The ability of the Minister to prescribe
additional characteristics for the standard telephone service under
proposed subsection 8BA(2) enables the standard telephone service,
which must be supplied on request for the purposes of the USO, to
be more precisely specified. This mechanism could be used, for
example, to set specific voice quality requirements.

Item 219 - Subsections 9(2) and
(3)

Item 219 repeals subsections 9(2) and (3) of
the Consumer Protection Act and substitutes a number of subsections
which clarify the matters that are included in the USO.

Proposed subsection 9(2) provides that the
obligation under paragraph 9(1)(a) includes the obligation to
supply standard telephone services ‘on request’, that
is, on the request of the person seeking supply of the relevant
service.

Proposed subsection 9(2A) provides that the
obligation under paragraph 9(1)(b) includes the obligation to
supply, install and maintain payphones in Australia.

Proposed subsection 9(2B) provides that the
obligation under paragraph 9(1)(c) includes the obligation to
supply prescribed carriage services ‘on request’, that
is, on the request of the person seeking supply of the relevant
service.

Proposed subsection 9(2C) provides that an
obligation under paragraph 9(1)(a) or proposed subsection 9(2) does
not arise unless the request complies with the requirements (if
any) set out in a determination under proposed subsection
9(2D).

Proposed subsection 9(2D) allows the Minister,
by legislative instrument, to determine requirements for requests
(for the purposes of proposed subsection 9(2C), such as the form of
the request or information to be provided in a request.

Proposed subsection 9(2E) confirms that the
obligation under paragraph 9(1)(a) or subsection 9(2) will not
arise under circumstances specified in a determination under
proposed subsection 9(3).

Proposed subsection 9(3) enables the Minister
to determine circumstances for the purposes of proposed subsection
9(2E), such as where a request has been already received for the
same standard telephone service. It is expected the Minister would
also exempt a primary universal service provider from having to
supply a service in response to a request where doing so would, for
example, expose workers to unreasonable dangers, where the customer
fails to identify the premises where the service is to be supplied,
or where there are demonstrated customer creditworthiness grounds.
This determination will be a legislative instrument, which means
that it would be registered on the Federal Register of Legislative
Instruments and would be subject to Parliamentary disallowance.

Item 220
- Subsection 9(4)

Item 221
- Subsection 9(5)

Item 222
- Subsection 9(6)

Items 220, 221 and 222 provide for
consequential amendments to be made to the noted subsections as a
result of the amendments to section 9 made by item 219.

Proposed section 9A, in effect, re-enacts
current subsections 9A(3) and 9A(5) as proposed subsections 9A(1)
and 9A(2). The remaining subsections in current
section 9A are no longer required as a result of other
amendments made by item 225 of the Bill.

Proposed subsection 9A(1) enables the Minister
to make a determination regarding what is or is not necessary to
determine when prescribed carriage services are reasonably
accessible under paragraph 9(1)(c).

Proposed subsection 9A(2) provides that the
determination will be a legislative instrument, which means that it
would be registered on the Federal Register of Legislative
Instruments and would be subject to Parliamentary disallowance.

Item 224 - Subsection 12C(1)

Item 224 would omit the phrase ‘take all
reasonable steps to’ from subsection 12C(1) of the Consumer
Protection Act. This proposed amendment would clarify the
obligations of a primary universal service provider to strictly
comply with its service obligations as described under
section 12C. This would also make it easier for the ACMA to
determine when it could initiate action for breach of an obligation
under the universal service regime.

Item 225
- After Subdivision B of Division 5 of Part 2

Item 225 inserts proposed Subdivisions BA and
BB into Division 5 of Part 2 of the Consumer Protection Act.
Proposed Subdivisions BA and BB include a number of provisions
dealing with performance standards and performance benchmarks for
standard telephone services and payphones for primary universal
service providers to be made by the Minister through legislative
instruments.

Proposed
Subdivision BA—Standard telephone service
requirements

Proposed
section 12EB Performance standards

Proposed subsection 12EB(1) enables the
Minister to make a determinati